The Bank of England Gilt Repo Market review has drawn attention to the central role of repo transactions in UK financial stability. On 5 September 2025, the BoE released a discussion paper proposing measures to improve resilience in the gilt repo market, a key part of the sterling rates ecosystem.
Key Options for Reform
The paper presents two main proposals. The first is greater central clearing of gilt repo transactions, designed to enhance dealer balance sheet efficiency, reduce counterparty credit risk, and limit risks from disorderly unwinds of leveraged positions.
The second proposal focuses on minimum haircuts or margins on non-centrally cleared gilt repo. This measure aims to lower credit risk and address vulnerabilities from highly leveraged trades. According to the BoE, both reforms could either complement each other or serve as stand-alone solutions.
In addition, the Bank is considering alternative measures. These include enhanced disclosures by both public and private market participants, which could improve transparency and market confidence.
Financial Stability Perspective
Sarah Breeden, Deputy Governor for Financial Stability, emphasized that repo markets must absorb shocks rather than amplify them. She noted that “it is essential the financial system continues to provide vital services to the real economy even during stress.”
Breeden explained that the BoE has already taken steps to address vulnerabilities but highlighted the importance of ongoing reform. The discussion paper, she added, is a way to progress thinking on potential options for market stability.
Global Context
The Bank of England Gilt Repo Market review is part of a broader international effort. Other jurisdictions have already introduced or are exploring similar measures. For example, the US Securities and Exchange Commission (SEC) has mandated central clearing for most repo and US Treasury cash transactions by mid-2027. This move aims to mitigate systemic risks and ensure orderly market functioning.
Furthermore, the Financial Stability Board (FSB) is coordinating global reforms to address risks in core financial markets. The UK’s consultation reflects this coordinated approach, aligning with global standards while considering domestic needs.
Collaboration and Next Steps
The discussion paper was developed in consultation with the Financial Conduct Authority (FCA), HM Treasury, and the UK Debt Management Office (DMO). Following industry feedback, the BoE will determine its next steps, working alongside other UK authorities.
The Bank stressed that government bond markets remain vital to financial stability. As such, ensuring the resilience of the gilt repo market is crucial for the smooth operation of the UK’s broader financial system.
Conclusion
The Bank of England Gilt Repo Market review underscores the importance of reform in safeguarding market resilience. By exploring options like central clearing and minimum haircuts, the BoE is preparing the UK financial system to withstand future shocks. Moreover, its collaborative and forward-looking approach demonstrates a clear commitment to long-term stability in government bond markets.
