Bank credit officers are more likely to approve loan requests early and late in the working day — and reject those processed around noon, a study found.
UK psychologists studied the decisions made on 26,501 loan restructuring requests by a major bank’s team of 30 credit officers over the course of one month.
They found the officers appeared to develop ‘decision fatigue‘ around the middle of the day, making them more likely to default to the safer option of saying no.
Processing loan-related requests involves weighing up the customer’s financial strengths against their risk factors — and is therefore cognitively demanding.
Making the wrong decision can be costly, as although restructuring often results in a loss compared to the original payment plan, defaulting can be worse for the bank.
According to the team, the findings highlight how having regular breaks amid long periods of intense work can make employees more productive overall.
Bank credit officers are more likely to approve loan requests early and late in the working day — and reject those processed around 12pm, a study found (stock image)
‘Credit officers were more willing to make the difficult decision of granting a customer more lenient loan repayment terms in the morning,’ said paper author and psychologist Simone Schnall of the University of Cambridge.
‘But by midday they showed decision fatigue and were less likely to agree to a loan restructuring request.’
‘After lunchtime they probably felt more refreshed and were able to make better decisions again,’ she added.
In the study, the loan applications the credit officers were processing were so-called restructuring requests.
These are cases where a struggling customer who already has a loan is asking the bank to adjust their repayment schedule to help them.
By studying decisions at a bank, the team were able to provide the first calculation of the economic impacts of decision fatigue in a specific context.
Customers were seen to be more likely to completely repay their loan if their schedule was restructured than if the original repayment terms were maintained.
This meant that the trend of declining more requests around lunch resulted in an avoidable financial loss for the bank.
The researchers concluded that the bank could have collected an additional $500,000 in loan repayments if all decisions had been made in the early morning, before the fatigue had set in.
UK psychologists studied the decisions made on 26,501 loan restructuring requests by a major bank’s team of 30 credit officers over the course of one month. They found the officers appeared to develop ‘decision fatigue’ around the middle of the day (left), making them more likely to default to the safer option of saying no (right)
‘Even decisions we might assume are very objective and driven by specific financial considerations are influenced by psychological factors,’ said paper author and psychologist Tobias Baer, also of the University of Cambridge.
‘This is clear evidence that regular breaks during working hours are important for maintaining high levels of performance.’
The full findings of the study were published in the journal Royal Society Open Science.
