CML backs FCA’s behavioural science approach

Speaking at the CML annual lunch today he described the introduction of the approach by the regulator as “a good move” and one which he thinks the government should take note of.

He said: “To understand why things happen and with what motivation is essential in anticipating outcomes and managing solutions.

“However I hear on so many occasions that lenders are not doing their job; that they are simply not lending money. But I wonder whether the accusers have ever tried to understand why?”

Terrington said the accusation has become a politically adopted mantra with which to beat what has become the common enemy and reflects politicians’ lack of understanding of the matter.

He added that there was considerable analytical application to the financial measurement of risk some of which is used as an explanation for why banks are not lending but raised the question – has anyone ever asked the customers.

He said: “Has the government really asked its citizens why they are not borrowing? I emphasise the word really because using limited information or anecdotes to drive views and steer policy is simply wrong and frankly dangerous. Maybe the FSA’s lead on behavioural science should be adopted more widely?

“We, as an industry, and the government need to do more to understand the motives and actions of our customers and citizens respectively.

“This will help the development of policies. It may challenge those traditional views of lenders’ unwillingness to lend, rather than a consumer’s unwillingness to borrow, always being the problem.”

The CML has commenced a detailed research project to appreciate consumer attitudes to home ownership.

It found that the desire to own a home was as strong as ever but there was a general lack of confidence which meant that people are postponing this decision.

Terrington added: “The research is rich in helping us to understand consumer behaviour and we call on others to follow our example. It is time to genuinely ask the UK consumer what will make the difference – but it has to be genuine and not self-serving to justify another objective.”