Bank of England seeks feedback on measures to strengthen gilt repo market resilience
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Institutions: Reserve Bank of India | Ministry of Finance | NITI Aayog
The Bank of England has released a Discussion Paper outlining potential measures to enhance the resilience of the UK government bond (gilt) repo market. Developed in consultation with the Financial Conduct Authority, HM Treasury, and the UK Debt Management Office, the paper highlights the importance of repo markets in supporting government bond functioning, financial stability, and sustainable economic growth. Two core options are under consideration: expanding central clearing of gilt repo transactions to reduce counterparty risks and improve balance sheet efficiency, and introducing minimum haircuts or margins on non-centrally cleared gilt repo to mitigate risks from highly leveraged positions.
Additional options, such as enhanced counterparty disclosures, are also being explored. Drawing parallels from international efforts, including the US SEC mandate for central clearing of Treasury repos by 2027, the Bank underscores the need for continued reforms. Feedback is invited from market participants and the public on the feasibility, benefits, and potential costs of these measures.
Relevant question for policy stakeholders: How can emerging markets adapt repo market resilience measures without constraining market liquidity?
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