Bank of England launches dialogue paper in search of views on measures to reinforce gilt repo market resilience

News launch

The Bank of England (the Bank) has immediately printed a Discussion Paper (DP) on potential measures to reinforce the resilience of the UK authorities bond (‘gilt’) repo market, developed in shut session with the Financial Conduct Authority (FCA) and with enter from HM Treasury and the UK Debt Management Office (DMO). 

Government bond markets are central to monetary stability and to the availability of significant companies, funding, and sustainable financial progress. Within that, the repo market performs an important position in underpinning the graceful operation of presidency bond markets. 

The Bank’s System-wide Exploratory Scenario (SWES) underscored the significance of guaranteeing enough capability in repo markets to help the resilience of presidency bond markets and improve monetary stability. 

A spread of jurisdictions are exploring and, in some circumstances implementing, measures to reinforce the resilience of their authorities bond repo markets. In the US, the Securities and Exchange Commission (SEC) mandated central clearing for many repo and money US Treasury transactions by mid-2027 to mitigate systemic dangers from non-centrally cleared transactions and help orderly market functioning. In addition to home work, the Financial Stability Board (FSB) continues to co-ordinate a broad agenda of worldwide work to mitigate dangers to core monetary markets. 

Today’s DP explores potential measures to strengthen the gilt repo market and guarantee it could actually fulfil its very important position within the UK monetary system, together with in periods of stress. The DP focuses on two potential choices: 

• Greater central clearing of gilt repo has the potential to supply advantages together with by way of enhancing vendor steadiness sheet effectivity, decreasing counterparty credit score threat, and mitigating dangers from the disorderly unwind of extremely leveraged, concentrated positions. 
• Minimum haircuts or margins on non-centrally cleared gilt repo can also assist scale back counterparty credit score threat and mitigate dangers from essentially the most extremely leveraged positions.

The Bank is in search of suggestions on how these choices might be virtually designed and applied to strengthen the gilt repo market, in addition to on any potential prices which may come up. 

The DP additionally considers further choices that will bolster the resilience of the gilt repo market. These might be applied as alternate options to, or alongside better central clearing or minimal haircuts, akin to better private and non-private counterparty disclosures. The DP welcomes enter on these and different potential measures as nicely. 

Sarah Breeden, Deputy Governor for Financial Stability stated: 

“It’s important that market-based finance and core sterling charges markets soak up moderately than amplify shocks to make sure the monetary system continues to supply very important companies to the actual economic system even in periods of stress. We’ve already taken significant steps in direction of addressing vulnerabilities within the gilt repo market, however it is crucial that we proceed to discover reforms. This DP will enable us to progress our pondering on a number of key potential choices. 

We welcome views and suggestions from gilt repo market contributors, the broader trade, and the general public on how these choices may ship advantages for the gilt repo market and the broader monetary system.”

Next steps

Following suggestions on the DP, the Bank will contemplate subsequent steps in shut session with different UK authorities. Should any measures be taken ahead a session course of would observe. Any insurance policies consulted on would additionally contemplate applicable timelines to allow market contributors to have interaction with coverage design and put together for any changes.

Responses must be submitted by 28 November 2025 to [email protected]

Notes to editors

1. Enhancing the resilience of the gilt repo market – Discussion Paper 
2. The Financial Policy Committee’s strategy to market-based finance: Financial Stability in Focus: The FPC’s strategy to assessing dangers in market-based finance.   
3. The Bank of England’s system-wide exploratory situation train remaining report.
4. FSB coverage suggestions on leverage in Non-bank Financial Intermediation: FSB publishes recommendations to address financial stability risks created by leverage in nonbank financial intermediation – Financial Stability Board.