A former Bank of England financial analyst has written to governor Andrew Bailey, urging him to prepare for the fallout that could follow the discovery of extra-terrestrial lifeforms.
On paper, this sounds like a ridiculous idea.
The Old Lady is about to kick off a wide-reaching and labour intensive system-wide stress test that will include private credit and equity firms for the first time. Examining the impact of UFOs over Whitehall on the Gilt market seems like a total waste of time in comparison.
The Bank of England’s mandate is to maintain monetary and financial stability, not draw up battle plans for the appearance of tripods on Threadneedle Street. But preparing for this might not be as crazy and useless as it appears.
Fifteen years ago, the US’ Centers for Disease Control and Prevention (CDC) published Preparedness 101: Zombie Apocalypse, which used the guise of a zombie apocalypse to inform the US public about what to do during a real non-living dead-based emergency.
Similarly, the US Department of Defence, ever keen on a potential zombie apocalypse, has used such a scenario to help train junior officers while avoiding using a real country in a potentially politically charged exercise.
A similar central bank-led exercise could help prepare the market — and the public — for unpredictable financial occurrences, or UFOs. Financial stability is, for many, an impenetrable subject, and packaging it up in a pop culture wrapper could go far in helping the public (and some bankers) understand what could happen in a real life shock scenario.
Geopolitics are uncertain and sudden shocks appear likely at every turn.
Only a few years ago, the prospect of the US invading a fellow Nato country seemed about as likely as an alien spacecraft landing on the White House’s south Lawn. But today, it dominates the news flow.
Perhaps ultimately, it is not little green men from Mars that these sorts of exercises can help prepare for, but those closer to home. After all, Russia's so-called little green men started appearing in Ukraine in 2014, and look how that turned out.
The sudden appearance of flying saucers over the UK would likely have the same ramifications for the markets as foreign fighter jets.
While many syndicate desks lament their lack of crystal balls, being able to trade or issue successfully relies on having an accurate idea of what might happen, from predicting interest rate paths to what falling Gilt prices might do the value of an HQLA portfolio.
In these most uncertain of times, those responsible for functioning capital markets should consider the most extreme scenarios, however they want to label them.