ABSTRACT
Chapter 7 discusses three key ways in which the Bank of England’s risk imagination has been extended following the misfire of financial risk management in 2007. The first key extension can be found in the move within stress testing towards thinking about extreme, rather than probable, financial events. Second, the development of ‘Biennial Exploratory Scenarios’ in regulatory stress testing is designed to probe risks that may not be neatly linked to the financial cycle. The third development has seen a public consideration by the Bank of contentious political issues, namely climate change, cyber security and Brexit, as discrete risks to financial stability.
