Exploratory tail risk

This chapter analyses exploratory tail risk research undertaken by the Bank of England which employs Biennial Exploratory Scenario (BES) stress tests, agent-based modelling, and Growth-at- Risk (GAR) models. This chapter argues that such calculative are implicated in expectations management work that attempts to share insights and shape institutions’ interpretations around new macroprudential policy tools. Following the publication of the 2019 BES stress test findings, the Bank of England communicated its expectations about the use of the liquidity buffers and the workings of the Liquidity Coverage Ratio. The experimental work undertaken using agent-based models and GAR simulated the potential impact of various central bank macroprudential tools relating to capital buffers and limits on of mortgage credit. This chapter argues that Bank of England staff attempted to reassure their market audience that experimental findings would not be directly used to set policy tools. However, the novel nature of the experiments and the discursive work used to keep this work distinct from regulatory intervention may well have led regulated firms to doubt the credibility of these imagined futures.