Bank of England launches consultation to lift UK O-SII buffer thresholds by 20% and index them to nominal GDP

The Bank of England’s Financial Policy Committee (FPC) has published a consultation proposing changes to the framework that guides the Prudential Regulation Authority’s (PRA) setting of Other Systemically Important Institutions (O-SII) buffer rates for ring-fenced banks and large building societies. The core proposal is to raise the leverage exposure measure (LEM) thresholds used to determine firms’ O-SII buffer buckets by 20% and to move to a standing approach of updating thresholds in line with nominal GDP growth. The FPC is seeking to mitigate unintended “prudential drag” from fixed nominal thresholds, given around 20% cumulative growth in UK nominal GDP between 2019 and 2023, which could otherwise pull more firms into scope and move existing firms into higher buffer buckets without a commensurate rise in their potential to disrupt UK credit supply. Under the proposal, the buffer rate mapping would be unchanged (0.0% to 3.0% of risk-weighted assets), but the LEM thresholds (rounded to the nearest GBP 5 billion) would rise to: 0.0% below GBP 190 billion, 1.0% from GBP 190 billion to below GBP 365 billion, 1.5% from GBP 365 billion to below GBP 540 billion, 2.0% from GBP 540 billion to below GBP 715 billion, 2.5% from GBP 715 billion to below GBP 890 billion, and 3.0% at or above GBP 890 billion. The consultation closes on 30 May 2025. If the FPC confirms the changes, the PRA will reissue 2024 O-SII buffer rates to reflect the updated thresholds, with the reissued rates applying from 1 January 2026; future threshold indexation would be assessed in the FPC’s regular framework reviews (at least every three years) and communicated via the FPC Record without further consultation for use in subsequent PRA rate-setting.