MNI BRIEF: BOE Urges Ongoing Engagement With Gilt Repo Consult

The Bank of England's consultation on potential reforms to improve the resilience of the gilt repo market has stressed the risk of the unintended consequences of reforms aiming to maximise leverage and enhance market resilience, the Bank's Director of Financial Stability Strategy said on Wednesday.

The Bank's consultation with market participants on potential reforms outlined in a September discussion paper has stressed "the potential unintended consequences that could be associated with a one size-fits-all solution, such as a whole-market clearing mandate which may not fully take into account the specific risk profiles and liquidity needs of different market participants." Lee Foulger told an AFME conference in Brussels.

"Our primary objective is to mitigate risks stemming from highly leveraged, concentrated positions that pose a threat to financial stability," he added. "Minimum repo haircuts create a maximum leverage available to funds, thereby enhancing overall market resilience." Foulger invited market participants to continue to engage with the consultation, which closes on Nov 28.