The Notebook: Is it time for the City to embrace behavioural science? 

When Rachel Reeves laid the groundwork for deregulating the finance sector last month, the City’s behavioural scientists spied an opportunity. 

After all, you don’t need an encyclopaedic knowledge of the City’s post-crisis rap sheet to understand that relying on regulation and controls to influence financial workers’ behaviour has its limitations.

Whereas if there were a deeper understanding of the behavioural drivers of misconduct then we would need less regulation, David Grosse, the former head of behavioural risk for HSBC Global Banking and Markets, recently told the Following the Rules podcast.

To be sure, bank bosses and their regulators have long espoused the benefits of deploying behavioural science in their organisations. 

But meaningful buy-in for doing so is needed from all an organisation’s stakeholders for it be effective. That can be harder to achieve. “Heads of markets keep saying, ‘I pay [my team] enough so they just need to stick to the rules’,” Dr Wieke Scholten, the former head of behavioural risk at NatWest told the same podcast. “From a behavioural science perspective, it’s a bit ignorant.”

There can also be an inclination amongst City bosses and their watchdogs to treat misconduct as isolated hitches best resolved via tighter controls. Finance leaders tell me they would be reluctant to adopt a more behaviourally minded approach without specific guidance from their supervisors. Regulators are unlikely to provide too much of that, not least amidst a broader pushback on overly involved supervision. 

But more of a push is needed: widespread adoption of behavioural science has been slower “than is ideal” within the City, according to Grosse.

Annemarie Durbin of the Yorkshire Building Society probably spoke for many in financial services when she recently described her organisation’s embrace of behavioural science as “embryonic”.

After all, it can never be a panacea. 

And yet, says Scholten, “you don’t need whole departments of psychologists” to add value here.

So could the government’s push for looser regulation be the catalyst to encourage City bosses to take a different approach? 

To Grosse, the case for doing so is solid: “We’ve all seen how this movie ends… do we want to end up there again?”

Do we, indeed?

Code Red for City ‘work phones’? 

Regulators’ efforts to clampdown on City workers’ WhatsApp use saw several firms reversing long-standing policies allowing staff to use personal mobiles for work. But compliance chiefs now face a new headache: how do you ensure employees use their work phones at work? 

Some compliance teams believe they have the answer: make the work phone a different colour to a typical personal phone. 

“If I’m a compliance officer wandering around on a trading floor, I want to know that the phone that you’re using WhatsApp on is the work one,” says one proponent of this approach. “We want to limit the chance of there being any confusion.” 

Surveillance specialists say alternatives such as requiring personal phones to be stored in trading floor lockers can be unpopular and expensive to enforce. Resource-strapped compliance departments, although undecided on which colour to choose, hope colour-cording phones will encourage self-policing. After all, you’re more likely to comply if you know colleagues will notice if you don’t. 

But the success of it rides on the existence of an established institutional culture of compliance. That’s a requirement that several firms could struggle with.

When will Meta listen?

Following government calls for tech firms to do more to tackle online fraud, UK Finance’s David Postings took the opportunity to personally single out industry giant Meta for the first time. Last year, UK Finance found that 61 per cent of all reported authorised push payment fraud by volume is connected to Meta. “They owe it to their users to do more,” Postings told Following the Rules. “This is nothing we haven’t said to them.” So, what will it take for Meta to listen?

Quote of the week:

“I don’t think this is the end of the matter.” 

Tulip Siddiq signals the FCA needs to do more to absolve industry concerns about its plan to name more companies under investigation.

What I’m watching: Viola’s Room by Punchdrunk

Immersive theatre enthusiasts will know Punchdrunk as the pioneer of the genre. But its latest offering was my first experience of the company’s performances. 

Written by Booker Prize-shortlisted Daisy Johnson, Viola’s Room sees the audience guided barefoot through a part allegory, part gothic mystery by illumination and Helena Bonham-Carter’s voice. The result is an intimate experience I was wowed by.

But Punchdrunk aficionados may be disappointed that the show is a departure from everything the company has produced before. There are no actors and Punchdrunk’s signature choose-your-own-adventure style of storytelling has been replaced with a linear, more accessible, format. Regardless, for a novel experience in an unusual format, it’s worth a visit.  And if you do go, let me know. I have questions about the ending. 

Lucy McNulty is editor of Following the Rules Podcast