Banking on DST

There’s a reason we call it cuckoo.

There’s a reason we call it cuckoo.

Daylight Savings Time wreaks havoc on everyone, but it brings particular challenges to the banking industry.

If you happen to live in a place where it is now one hour earlier than it was at this time a little over a week ago, I hope you have recovered from this year’s wrapping up of the shock to your system known as Daylight Savings Time.

Seriously. David Gorsky, MD, an oncologist and contributor to the Science Based Medicine blog, did a deep dive into the health effects of DST, resurfacing with a well-documented, not-pretty picture. Here’s what science has been able to document during the few weeks it takes our bodies to adjust to getting up an hour earlier: a measurable increase in traffic-related deaths and pedestrian fatalities (the incidence declines with the return to Standard Time); increased risk of heart attack and stroke; an increase in suicide among men (this also occurs with the switch back to Standard Time); increased human error; and an increase in wasted time on the job.

(And pity the poor clock shop proprietor. Bob Capone, owner of Hands of Time in Savage Hills, Maryland, has the privilege of manually resetting an inventory of some 400 clocks twice per year.)

To be fair, Gorsky points out, DST is also associated with increased physical activity among children and lower robbery rates, both easily attributable to increased daylight hours. But he may be mistaken in allowing that DST may increase retail sales, a belief that helped drive the United States Department of Energy’s 2007 decision to push the cutoff date from October to November. If credit card purchases are an indicator, a JPMorgan Chase study suggests that the increase is illusory. The study tracked credit card purchases in Los Angeles, where DST is observed, and, as control, in Phoenix, where it is not. The study found: 

… a 0.9 percent increase in daily card spending per capita in Los Angeles at the beginning of DST and a reduction in daily card spending per capita of 3.5 percent at the end of DST … The magnitude of the spending reductions outweighs increased spending at the beginning of DST.

Ironically enough, the one thing DST doesn’t do is what it was meant to do, that is, cut energy consumption. Depending on whose measure you accept, DST cuts energy use somewhere between 0.03 percent and not at all, or actually increases it.

In financial markets, it appears that moving in and out of DST correlates with riskier investment activity. The University of Glasgow’s Antonios Siganos found that:

… when a merger is announced over a weekend or on a Monday following daylight saving time, the average stock return went up by around 2.50% more in relation to announcements that took place on other days—a statistically significant increase in profits for the target firms. 

By way of explanation, Siganos proffers:

With plenty of evidence that investors experience relatively stronger mood swings and higher risk-taking behaviour when their circadian rhythm is disturbed, it seems as though daylight saving time causes investors to push the stock prices of target firms to more extreme values. 

It goes without saying that people working in financial services industries are as subject as anyone else to mood, safety, and judgment swings due to time shifts. This can certainly increase human error during acclimatization. Over and above, the banking industry has its technical DST challenges, as this 2007 warning from the FDIC makes clear: 

The impact of the DST change may not cause system failures; however, without remediation and preparation, financial institutions could experience automated logging errors, system monitoring difficulties, degraded system performance, or disruption of some services. In addition, malfunctioning systems could result in compliance errors (e.g., incorrect ATM disclosures) and malfunctioning security systems. Examples of other systems that may be affected include those controlling heating, air conditioning, lights, alarms, telephone systems, PDAs (personal digital assistants) and cash vault doors.

An industry with (arguably obsolescent) standards like “close of business” and “working days” already has its hands full with time zones. Regional, national, and international banks need to be mindful that a closed business day in New York will remain in full swing for another five hours in Hawaii. Switching between Standard and Daylight Savings complicates matters further, and locales within the U.S. that opt out of DST, such as Indiana, Hawaii, and certain U.S. territories, complicate them even more. And then there are states like Arizona, where most of the state has opted out of DST, but 27,000 square miles of it—namely, the Navajo Nation—have opted in.

In 1784, Benjamin Franklin wrote that Parisians could conserve candle wax by getting up an hour earlier. But Franklin was joking. He would have been surprised when, a century and a half later, New Zealand entomologist George Vernon Hudson proposed DST in earnest. Germany implemented DST in 1916. The United States followed in 1918 with the passage of the Standard Time Act, better known as the Calder Act. 

Not exactly pulling punches, the Financial Post called Daylight Saving Time “dumb, dangerous and costly to companies.” They may have been on to something.

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