In the UK, regulatory reporting was introduced in 1974. Returns could have around 150 entries. In the Bank of England archives is a memo to George Blunden, who was to become Deputy Governor, on these proposed regulatory returns. Blunden’s handwritten comment reads: “I confess that I fear we are in danger of becoming excessively complicated and that if so we may miss the wood from the trees”. 12 Today, UK banks are required to fill in more than 7,500 separate cells of data – a fifty-fold rise. Forthcoming European legislation will cause a further multiplication. Banks across Europe could in future be required to fill in 30–50,000 data cells spread across 60 different regulatory forms. There will be less risk of regulators missing the wood from the trees, but only because most will have needed to be chopped down. In the US, regulatory reporting has a history going back to the early 19th century. Nationally-chartered banks began to submit quarterly returns after the formation of the OCC in 1863. In 1869, following a legislative amendment, these became “call reports”, so named because banks were asked to report on surprise dates to prevent window-dressing. The Federal Reserve Act of 1913 required all state-chartered member banks to file reports with the OCC and in 1917 responsibility for collecting these passed to the Federal Reserve. By 1930, these reports might contain around 80 entries. Today, regulatory reporting is on an altogether different scale. Since 1978, the Federal Reserve has required quarterly reporting by bank holding companies.

Studies of the behaviour of doctors illustrate this pattern (Gigerenzer and Kurzenhäuser (2005)). Fearing misdiagnosis, perhaps litigation, doctors are prone to tick the boxes. That may mean over-diagnosing drugs or over-submitting patients to hospital. Both are defensive actions, reducing risks to the doctor. But both are a potential health hazard to the patient. For  7  Gigerenzer and Brighton (2009). BIS central bankers’ speeches  5  example, submitting patients to hospital increases significantly their risk of secondary infection. Hospitals are, after all, full of sick people. Doctors unencumbered by a complex rulebook will have fewer incentives to act defensively. They may also be better able to form their own independent judgements when diagnosing medical problems, using their accumulated experience. That ought to more closely align a doctor’s risk incentives with their patient’s. The same is likely to be true of other professions, from lawyers to policemen to bank supervisors. Of course, simple rules are not costless. They place a heavy reliance on the judgement of the decision-maker, on picking appropriate heuristics. Here, a key ingredient is the decision-maker’s level of experience, since heuristics are learned behaviours honed by experience. A dog will outperform a puppy at frisbee-catching because it has had time to fine-tune its “gaze heuristic”. An expert baseball player or cricketer will outperform a novice sportsman for the same reason. So too will an experienced doctor or detective or fund manager or shopkeeper. These are “Five Commandments” of decision-making under uncertainty. That description is apt.