Bank of England Seeks Input on Strengthening Gilt Repo Market Resilience
The Bank of England has launched a Discussion Paper (DP) inviting feedback on potential measures to bolster the resilience of the gilt repo market. The initiative aims to ensure the market can effectively absorb financial shocks and continue supporting the wider economy, even during periods of stress.The DP focuses on two primary options: increasing central clearing of gilt repo transactions and implementing minimum haircuts or margins on those that are not centrally cleared. The bank believes greater central clearing could improve dealer balance sheet efficiency, reduce counterparty credit risk, and mitigate risks associated with the unwinding of highly leveraged positions. Minimum haircuts and margins on non-centrally cleared transactions are also seen as a way to reduce counterparty credit risk and address risks from highly leveraged activity.
Beyond these core proposals, the Bank is also exploring additional measures, including enhanced disclosures from both public and private counterparties. It welcomes input on these and any other potential strategies to strengthen the market.
“It’s essential that market-based finance and core sterling rates markets absorb rather than amplify shocks to ensure the financial system continues to provide vital services to the real economy even during periods of stress,” stated Sarah Breeden, Deputy Governor for Financial Stability. “We’ve already taken meaningful steps towards addressing vulnerabilities in the gilt repo market, but it is vital that we continue to explore reforms. This DP will allow us to progress our thinking on several key potential options.”
Breeden added, “We welcome views and feedback from gilt repo market participants, the wider industry, and the public on how these options might deliver benefits for the gilt repo market and the wider financial system.”
Following the feedback period, the Bank will consider next steps in collaboration with other UK authorities. Any measures adopted will be subject to a formal consultation process, with timelines designed to allow market participants to prepare for any adjustments.
Responses to the Discussion Paper should be submitted by November 28, 2025, to GiltreporesilienceDP@bankofengland.co.uk.
The Discussion Paper,”Enhancing the resilience of the gilt repo market,” is available at: https://www.bankofengland.co.uk/paper/2025/discussion-paper/enhancing-the-resilience-of-the-gilt-repo-market.
