ICMA responds to the Bank of England's Discussion Paper on Enhancing the resilience of the gilt repo market
28 November 2025 ICMA has responded to the Bank of England’s exploratory discussion paper, Enhancing the resilience of the gilt repo market.
In responding to this discussion paper, ICMA convened a dedicated taskforce from its diverse membership. This was coordinated through ICMA’s European Repo and Collateral Council as well as through its Asset Management and Investor Council (AMIC). The Taskforce includes gilt-edged market maker (GEMM) repo traders, other active sell sides in the gilt repo market, as well as firms from the buy-side, including pension funds, insurers, UCITS asset managers, money market funds (MMFs), alternative investors (hedge funds), trading venues (cash and repo), central counterparties (CCPs), and custodians. Essentially, the Taskforce represents the entire gilt and gilt repo market ecosystem, and a diversity of perspectives and priorities.
In its response, ICMA recognises the important benefits of central clearing for gilt repo, and the potential for increased non-bank participation, not least in reducing counterparty credit risk and expanding liquidity provision. ICMA notes the initiatives currently being undertaken by CCPs to support broader clearing participation, while maintaining the integrity of CCP risk management frameworks. Furthermore, ICMA identifies a number of regulatory initiatives that could help to remove barriers to access and so encourage non-bank participation in central clearing.
However, based on the unanimous member consensus, ICMA strongly opposes the suggestion of mandatory clearing for gilt repo. This would increase costs and restrict access for some participants, undermine the maturity transformation function of repo intermediation, and increase procyclicality. It is also not clear what the purpose of mandating clearing would be, and that the arguments relating to transparency, leverage, or counterparty credit risk are each flawed in the context of the UK market. Ultimately this would be a cost, and a risk, to gilt market stability and so to the UK economy. Clearing should be a commercial choice based on cost and risk considerations of the market participant and their clients.
Also based on broad consensus of members, the suggestion of minimum haircuts for bilateral gilt repo is dismissed for a number of reasons. Prime among these are: the fact that haircuts are a transaction-level tool intended to hedge liquidation risk and not intended to manage leverage; they do not take account of firms’ individual, counterparty-level risk management frameworks and risk appetite; and that they can introduce an additional and unnecessary cost and friction to trading in benign markets while quickly becoming redundant in volatile markets.
ICMA identifies a number of other policy measures, beyond improving access to clearing, that could be considered to enhance gilt market resiliency. Chief among these is the potential for enhancements to the operational resilience of the Sterling Monetary Framework (SMF), which could be the most meaningful and ultimately valuable outcome of this consultation. Promoting bank risk-management practices, in a number of areas, could also be a positive contributor to market resilience.
A well-functioning repo market is critical to the smooth and efficient operation of the gilt and other sterling fixed income markets, as well as for the effective transmission of monetary policy. Any additional costs to accessing the gilt market are a cost to UK taxpayers and savers, while any measures that make the gilt market more vulnerable to market volatility, or threatens its ability to function normally, particularly in times of stress, is a direct threat to the UK Government’s growth agenda.
