UK PRA consults on new automatic thresholds indexation framework

The UK Prudential Regulation Authority (PRA) has published consultation paper CP13/26, proposing a new framework for the automatic indexation of certain regulatory thresholds across the PRA Rulebook, supervisory statements and statements of policy. Under the proposal, eligible fixed monetary thresholds would be updated every five years using UK nominal GDP growth as the indexation metric, with the first update taking effect on 1 July 2031. The PRA states that the framework is intended to address “prudential drag”, where fixed thresholds become more restrictive over time as the economy grows. The criteria and methodology will be set out in a new statement of policy on the PRA’s approach to automatic indexation, a draft of which accompanies the consultation.

The PRA proposes bringing 128 thresholds within scope of the framework (set out in Appendix 3 and Appendix 4 of CP13/26). It also seeks feedback, through a discussion paper, on additional thresholds where the costs and benefits to firms of indexation are less clear to the PRA. These include thresholds relating to internal ratings-based models, liquidity thresholds that interact with credit risk thresholds, and thresholds operating across the PRA and UK Financial Conduct Authority frameworks relating to remuneration, whistleblowing and the Senior Managers and Certification Regime. Appendix 5 sets out the thresholds covered by the discussion chapter. The deadline for responses to both the consultation and the discussion paper is 7 February.

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