BoE publishes discussion paper on enhancing the resilience of the UK gilt repo market

The Bank of England has published a discussion paper (DP) setting out potential measures to enhance the resilience of the UK gilt repo market and support broader financial stability. Developed in consultation with the UK Financial Conduct Authority and informed by input from HM Treasury and the UK Debt Management Office, the DP reflects on insights from the Bank's System-wide Exploratory Scenario and considers international developments, most notably in the U.S., where the Securities and Exchange Commission (SEC) has mandated central clearing for most repo and cash US Treasury transactions by mid-2027. To strengthen the UK gilt repo market, the paper explores two primary options: (i) increasing central clearing of gilt repo transactions; and (ii) introducing minimum haircuts or margins on non-centrally cleared repos. These options aim to reduce counterparty credit risk and mitigate systemic vulnerabilities. The DP also considers additional measures that could improve market resilience, such as enhanced public and private counterparty disclosures. These could serve as alternatives to, or complement, the two core proposals. The deadline for responses is 28 November. Next steps will be considered closely with other UK authorities, with further consultation to follow should any measures be progressed.

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