News release
The Bank of England (the Bank) has today published a Discussion Paper (DP) on potential measures to enhance the resilience of the UK government bond (‘gilt’) repo market, developed in close consultation with the Financial Conduct Authority (FCA) and with input from HM Treasury and the UK Debt Management Office (DMO).
Government bond markets are central to financial stability and to the provision of vital services, investment, and sustainable economic growth. Within that, the repo market plays an essential role in underpinning the smooth operation of government bond markets.
The Bank’s System-wide Exploratory Scenario (SWES) underscored the importance of ensuring sufficient capacity in repo markets to support the resilience of government bond markets and enhance financial stability.
A range of jurisdictions are exploring and, in some cases implementing, measures to enhance the resilience of their government bond repo markets. In the US, the Securities and Exchange Commission (SEC) mandated central clearing for most repo and cash US Treasury transactions by mid-2027 to mitigate systemic risks from non-centrally cleared transactions and support orderly market functioning. In addition to domestic work, the Financial Stability Board (FSB) continues to co-ordinate a broad agenda of international work to mitigate risks to core financial markets.
Today's DP explores potential measures to strengthen the gilt repo market and ensure it can fulfil its vital role in the UK financial system, including during periods of stress. The DP focuses on two possible options:
- Greater central clearing of gilt repo has the potential to provide benefits including through enhancing dealer balance sheet efficiency, reducing counterparty credit risk, and mitigating risks from the disorderly unwind of highly leveraged, concentrated positions.
- Minimum haircuts or margins on non-centrally cleared gilt repo may also help reduce counterparty credit risk and mitigate risks from the most highly leveraged positions.
The Bank is seeking feedback on how these options could be practically designed and implemented to strengthen the gilt repo market, as well as on any potential costs that might arise.
The DP also considers additional options that may bolster the resilience of the gilt repo market. These could be implemented as alternatives to, or alongside greater central clearing or minimum haircuts, such as greater public and private counterparty disclosures. The DP welcomes input on these and other potential measures as well.
Sarah Breeden, Deputy Governor for Financial Stability said:
“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. We’ve already taken meaningful steps towards addressing vulnerabilities in the gilt repo market, but it is important that we continue to explore reforms. This DP will allow us to progress our thinking on several key potential options.
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.”
Next steps
Following feedback on the DP, the Bank will consider next steps in close consultation with other UK authorities. Should any measures be taken forward a consultation process would follow. Any policies consulted on would also consider appropriate timelines to enable market participants to engage with policy design and prepare for any adjustments.
Responses should be submitted by 28 November 2025 to GiltreporesilienceDP@bankofengland.co.uk
Notes to editors
- Enhancing the resilience of the gilt repo market - Discussion Paper
- The Financial Policy Committee’s approach to market-based finance: Financial Stability in Focus: The FPC’s approach to assessing risks in market-based finance.
- The Bank of England's system-wide exploratory scenario exercise final report.
- FSB policy recommendations 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.