The proposals would modernise the framework by increasing the proportionality and decreasing the costs of compliance for many firms by replacing the manual ad hoc updates that currently take place. Providing more certainty for firms would assist in their business planning and thereby reduce firms’ barriers to growth.
The largest in-scope threshold is the £320 billion total assets threshold for detailed capital reporting, with the smallest being a £7,500 threshold covering amounts owed to a credit union by an individual. Other significant thresholds involved include the size of an insurer subject to Solvency UK and the Small Domestic Deposit Takers regime total assets threshold.
The first update would take place on 1 July 2031, with further updates occurring every five years thereafter.
The package is expected to benefit all firms, but particularly small and medium sized firms hovering under regulatory thresholds – thereby supporting competition, economic growth and provision of services to the economy.
Katharine Braddick, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, said:
“This modernisation will significantly help financial services firms plan for the future, offering crucial stability and predictability, while also preventing out of date thresholds becoming restrictive barriers to growth.”
The PRA chose nominal UK GDP – published by the Office for National Statistics – as the indexation metric as it captures both changes in prices and real economic growth, which other measures like the Consumer Price Index or real GDP growth would not do.
The regulator proposes every five years for indexation to balance recurring adjustment costs for firms with thresholds being responsive to economic changes – and invites views on the package as a whole.
Today’s announcement builds on other recent reforms from the PRA designed to provide a stable environment for growth, including:
- Implementing Basel 3.1 in a capital-neutral and internationally-aligned manner to support the largest firms, while introducing Strong and Simple for more straightforward requirements for smaller firms;
- Proposing new liquidity rules to ensure banks can monetise liquid assets quickly in a fast-paced stress event;
- Consulting on reforms to the ring-fence to allow firms to share operational resources more flexibly.
Source: Bank of England
