Leverage ratio

LONDON, February 15, 2026 – Market participants are voicing concerns to the Bank of England (BoE) regarding proposals to mandate the clearing of gilt repo transactions, warning that a broad-stroke approach could increase costs without delivering the anticipated benefits of netting, according to reports surfacing today.

The BoE initially floated the idea of mandatory clearing in a discussion paper released on September 4, 2025, as part of a broader effort to enhance the resilience of the UK gilt repo market. The paper sought early views on potential measures to improve market functioning during periods of stress, specifically focusing on increased central clearing and minimum haircuts for non-centrally cleared transactions. Responses to the discussion paper were requested by November 28, 2025.

But, industry figures are now cautioning against a “blanket” approach, arguing that the UK gilt repo market operates differently than its US counterpart, where netting benefits are more readily realized. A report from Risk.net, published February 12, 2026, details these concerns, stating that participants fear increased costs without a corresponding improvement in risk mitigation.

The concerns center on the potential for a mandatory clearing regime to disrupt the existing market structure and add unnecessary layers of complexity. Market participants believe a more nuanced approach, tailored to the specific characteristics of the UK gilt repo market, would be more effective in achieving the BoE’s goal of enhanced resilience. The Bank of England, in conjunction with the Financial Conduct Authority (FCA), HM Treasury, and the UK Debt Management Office (DMO), initiated the review to ensure the smooth functioning of government bond markets, which are considered fundamental to financial stability and economic growth.

The discussion paper highlighted the importance of government bond repo markets in facilitating cash and gilt flows across the financial system, and as a source of funding for leveraged strategies. International bodies have increasingly emphasized identifying and mitigating vulnerabilities in these markets, particularly during times of stress. The BoE’s proposals are intended to address these vulnerabilities and ensure the market can absorb, rather than amplify, shocks.

As of today, the Bank of England has not publicly responded to the specific concerns raised by market participants. Further details on the BoE’s plans are expected as the review process continues.