BoE's Benjamin: gilt repo proposals due in early 2027, and some near-zero haircuts are set for competition

Serguey Asael Shinder04 October 2026, 13:082 min read

The Bank of England's Nathanaël Benjamin used a speech at ISDA's London Derivatives Trading and Treasury Forum on 1 October to set a date: the Bank intends to publish a comprehensive update on the resilience of the gilt repo market, including potential policy proposals, in early 2027. As in the past, he said, doing nothing is not an option. It is a speech by one official, not a decision of the Financial Policy Committee.

What the data show. By combining transaction-level reporting, fund reporting, supervisory data and market intelligence, the Bank says it can now see where leverage sits and who finances it. Benjamin repeated findings from the July 2026 Financial Stability Report: over four years hedge funds have moved from being net cash lenders to net cash borrowers in repo across several currencies, with banks by far the main providers of that leverage, and growth in hedge funds' gilt repo borrowing has coincided with rising futures open interest, consistent with an expanding cash-futures basis trade over the last 18 months.

The concern. The Bank's aim, he said, is not to reduce leverage financed in repo, which supports liquidity, but to stop structural features from amplifying market corrections, as in the 2022 liability-driven investment crisis. The worry is leveraged positions that are very large, concentrated or correlated relative to the market and could be unwound abruptly. In the Bank's first system-wide scenario exercise, many hedge funds assumed extra repo financing would be available in a stress; dealers said it would not necessarily be, and many funds then said they would have to unwind positions.

The tools under consideration.

• Central clearing. Bank researchers estimated that greater central clearing could have reduced gilt repo exposures on UK dealers' balance sheets during the 2020 dash for cash by 40% to 60%. Benjamin also discussed access models, including sponsored clearing.
• Haircuts. Zero or near-zero haircuts can be justified by netting and portfolio margining, but the Bank found that competition also plays a role, with some haircuts set to avoid losing a client rather than on risk grounds.
• Cross-margining, which can reduce unnecessary liquidity demands where risks genuinely offset, although correlations that look stable in calm periods may not hold under stress.

He said no single measure would be a silver bullet and that the options should be seen as complementary.

What it means

The date is the news: gilt repo users now know that proposals on clearing, haircuts and margining are due in early 2027. The haircut finding is the sharpest point for dealers, because it says some pricing in this market reflects competition for clients rather than measured risk, which is the kind of practice minimum-haircut rules are designed to address.