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​"Small improvements in the levels of diversity of senior appointments is welcomed, but much more progress is needed across the financial system"

Mar 08, 2019
The Central Bank of Ireland has published an analysis of over 5,000 applications for approval to occupy senior roles within regulated firms in Ireland (under the Fitness and Probity regime) in 2018. The Central Bank has committed to publishing this analysis on an annual basis as part of its continued focus on the importance of diversity in regulated firms. This is the third such publication.

At an overall level, there has been an improvement in the number of female applicants, rising from 22% 2017 to 24% 2018. While some firms are starting to make progress, much more needs to be done to increase the diversity of experience, thought, background and attributes at senior levels to:
  • Reduce the likelihood of group-think;
  • Reduce overconfidence and improve decision-making;
  • Enhance culture and improve risk management; and
  • Increase the level of internal challenge in financial services firms and reduce excessive resistance to external challenge.
Key developments in 2018 include:
  • Primarily due to Brexit, there was a 50% increase in the number of applications submitted during the period, compared to applications made in 2017;
  • The most material change in composition was in the banking sector, where 31% of applications were for women, compared to 25% in 2017; this was even more pronounced in the applications for board positions, which increased from 23% in 2017 to 36% in 2018;
  • Approximately four out of five applications for board positions were for men, marginally down on 2017 (82%); and this remained even more imbalanced for the most important Chair of the Board and Chief Executive positions, 84% of which were for men; and
  • The analysis continues to show a pronounced gender imbalance at board level and in revenue generating roles.
Deputy Governor, Prudential Regulation, Ed Sibley said: "Diversity matters. Similar people looking at similar information and facing similar circumstances are likely to rely on similar assumptions and make similar decisions. This type of group-think contributed to the depth of the financial crisis internationally and in Ireland and contributed to many of the conduct scandals that have subsequently emerged.

"While it is positive to see some progress, this is from a low base. More needs to be done to meaningfully address the acute lack of diversity at senior levels; this requires:
  • More ambition, including in targets and measures;
  • More than lip service being paid to diversity programmes;
  • Better building of pipelines of talent;
  • Considering the overall construct and functioning of the executive management teams when making appointments; and
  • Identifying and reducing barriers to change.”
Director General, Financial Conduct Derville Rowland said: "It is positive to see improvements in gender diversity at senior roles in regulated financial services providers, but it is also striking that there remains a pronounced gender imbalance at board level and in revenue generating roles. The Central Bank considers a lack of diversity at senior management and board level to be a leading indicator of heightened behaviour and culture risks in financial institutions. We intend to keep up the pressure on firms to ensure diversity also in those senior roles that are central to how they make their decisions, set their risk appetites and treat their customers."

Source: The Central Bank of Ireland 08/03/2019