On 12 November 2025 the Bank of England (BoE) published a speech by Lee Foulger (Director of Financial Stability Strategy and Risk) given at AFME’s 20^th Annual European Government Bond Conference examining the effectiveness and potential impact of reforms to improve the resilience of the UK gilt repo market.

Mr Foulger mentions that the BoE has strengthened its monitoring through its System-wide Exploratory Scenario exercise that has provided insight to the material changes in resilience of the gilt repo market in terms of liquidity needs, margin and counterparty credit risk. He highlights in this regard the structural dynamics of the gilt repo market and the importance of how market participants’ changing behaviours in core markets may affect UK financial stability, most notably the growing role of non-bank liquidity providers, increased electronic and high frequency trading, reduced reserves due to quantitative tightening and rising sovereign issuance. These changes challenge the traditional dealer-intermediated structure of the gilt repo market to which Mr Foulger mentions the BoE’s concerns on how liquidity might behave in stress, particularly if dealers’ capacity to intermediate is constrained by credit risk concerns of leverage built through near-zero haircut transactions.

In light of monitoring the changing dynamics, Mr Foulger notes the BoE’s two potential initiatives as mentioned in its discussion paper to enhance the resilience of the gilt repo market: greater central clearing and the introduction of minimum haircuts or margin requirements in non-centrally cleared transactions. He highlights the importance of the adoption and use of central clearing in the government bond repo market to be tailored specifically to the UK taking into account different risk profiles and liquidity needs of different market participants. As for the introduction of minimum haircuts on non-centrally cleared transactions, Mr Foulger mentions the near-zero haircut approach and to better understand how prudent this approach is at both a portfolio and collective level shifting from a one size fits all approach to a risk-sensitive approach welcoming further feedback.

In short, the Mr Foulger highlights the BoE’s shift from monitoring and reacting to adapting to the dynamics of the gilt repo market, expecting industry engagement and feedback on how these reforms might work in reality.