In November 2024, the Bank of England suggested that it was minded to intervene in the gilt repo market to support greater market resilience. The Bank indicated that recent market events, such as the “dash for cash” in March 2020 and the LDI event in September 2022, were evidence of market fragility. It also suggested that the increasing number of hedge funds entering the market represented a shift towards more price sensitive investors who were more active in entering and exiting positions. Together with an increase in the number of leveraged strategies, the Bank was concerned about the risk of disorderly unwinds and illiquidity during times of market stress.

In response, the Bank published a discussion paper in September 2025 looking at requiring mandatory central clearing in the gilt repo market and at imposing minimum margin haircuts on gilt repo transactions. It suggested that these interventions could reduce counterparty credit risk, support dealer confidence and reduce the risk of liquidity shocks during times of market stress.

A feedback statement published by the Bank in April 2026, suggested that most respondents opposed the introduction of mandatory central clearing and minimum margin haircuts, given the lack of available infrastructure, market readiness and the additional costs involved. Despite this, the Bank stated that measures were still required to improve the resilience of liquidity provision in the gilt repo market during times of stress and noted respondents’ opposition to the proposals were not generally supported by quantitative evidence.

In July 2026, Deputy Bank Governor for Financial Stability, Sarah Breeden, published a blog post seeking further feedback from market participants on market structure, barriers to sponsored clearing models, procyclical risks from central clearing and on the calibration of minimum haircuts.

The Bank of England is due to publish a comprehensive update on its work relating to the resilience of the gilt repo market in early 2027. This will include any potential policy proposals. In the interim, Deputy Bank Governor for Financial Stability, Sarah Breeden, has indicated a likely direction of travel, stating with respect to zero margin haircuts that “doing nothing is not an option” and that any potential design of minimum haircuts “would take account of portfolio-level approaches” (International Capital Markets Association, Sarah Breeden AGM and Conference speech, 28 May 2026).

Although firm proposals on mandatory central clearing are also not expected until early 2027, Deputy Bank Governor, Sarah Breeden, has also indicated a likely direction of travel, suggesting that greater central clearing will rely on the “development of approaching CPP clearing models” and that such changes will likely take “years rather than months” (International Capital Markets Association, Sarah Breeden AGM and Conference speech, 28 May 2026).

Collection of AIMA articles relating to the gilt repo market proposals