Bankers are much more likely to engage in misconduct when they work from the office — not from home, study says

• A new study analyzed financial misconduct investigations into traders at a UK bank amid the pandemic.
• Remote employees were significantly less likely to generate a securities misconduct report.

A new study of a bank in the UK found that working from home significantly decreased the rate at which its bankers generated financial misconduct reports and investigations.

Researchers said in a paper published late last month by the Social Science Research Network that they compared bankers from one of the five largest banks in the UK who worked in the office and those who were working from home between March 2020 and 2021.

"Our difference-in-differences analysis reveals that working from home lowers the likelihood of securities misconduct; ultimately those working from home exhibit fewer misconduct alerts," the paper's abstract reads. "The economic significance of these changes is large."

The paper's authors state that the new realities of working from home present several new factors to potential misconduct, including less direct oversight from managers.

However, they said that lack of oversight is balanced by decreased exposure to coworkers who may be guilty of their own misconduct, as well as less information that could motivate things like insider trading or collusion, so in total working from home may not present significantly more or less potential of misconduct.

"Working from home results in an absolute reduction of 14.7 percentage points in the annualized probability of an alert (misconduct report) per trading employee," the paper stated.

During the pandemic, the employees working from home had a 7.3% annualized chance to trigger an alert, while those in the office had a staggering 37.6% chance to trigger one, according to data from the study first reported by Axios.

Considering misconduct in securities trading could result in massive financial penalties, the authors state that working from home likely had a positive financial impact on the bank, and provides benefits to the business other than previously documented benefits like improved employee morale and a reduction of office costs.

The researchers analyzed how many "alerts" the employees generated, divided into two groups for the bank: communication alerts, which flag potential problems in employee emails and online chats with their colleagues, and trading alerts, which flag typical violations that are committed in securities trading.

Prior to the pandemic, the researchers estimated that over the course of a typical year — about 220 working days — an in-office employee had a 35.6 % chance of generating at least one alert.

The group of workers selected to work from home, about 53% of the total employees in the sample (86 work from home compared to 76 in office), were also found to be less likely to trigger alerts prior to the pandemic. The researchers said the bank did not say it intentionally picked traders with less alerts to work from home, but they concluded it may have played a role in who was allowed to work from home.