Bank of England publishes discussion paper on reforms to strengthen the UK gilt repo market

The Bank of England has published a discussion paper setting out potential measures to enhance the resilience of the UK government bond (gilt) repo market, developed in close consultation with the Financial Conduct Authority and with input from HM Treasury and the UK Debt Management Office. The paper aims to ensure the gilt repo market can continue to support the smooth functioning of government bond markets, including during periods of stress. The discussion paper focuses on two main options: expanding central clearing of gilt repo, and introducing minimum haircuts or margins for non-centrally cleared gilt repo. Greater central clearing is framed as a way to improve dealer balance sheet efficiency, reduce counterparty credit risk, and mitigate risks from the disorderly unwind of highly leveraged, concentrated positions, while minimum haircuts or margins on non-cleared trades are presented as a tool to reduce counterparty credit risk and limit risks from the most highly leveraged positions. It also invites views on additional measures that could be used alongside or instead of these options, including enhanced public and private counterparty disclosures. Responses are requested by 28 November 2025. After reviewing feedback, the Bank will consider next steps with other UK authorities, and any proposals taken forward would be subject to a subsequent consultation process with timelines intended to allow market participants to engage in design and prepare for adjustments.