Lack of diversity at senior level a leading indicator of behaviour and culture risk in financial institutions

Feb 08, 2019
Speaking at last week’s ‘Women in Leadership’ conference in UCD, the Central Bank of Ireland’s Director General Financial Conduct, Derville Rowland, highlighted the lack of gender diversity at senior management level in the financial services industry.

She said: “Research on the attitude to risk – both firm-based and experimental studies – tends to show that on average women take less risk than men – something you would expect is important when it comes to thinking about financial stability. Related to this, there are plenty of research papers showing how female leaders have more balanced management skills than men and are rated as better leaders.

“Other research has found that management teams with an equal gender mix perform better than male-dominated and female-dominated teams in terms of sales, profits and earnings per share. That is why I speak of a virtuous circle. Empowering women to believe in themselves is critical. But so too is the evidence that shows why diversity matters. And as that evidence is increasingly accepted, it will drive better outcomes – in the public and private sectors – that can only benefit us all.”

Noting that to the end of 2017, men had been appointed to more than nine out of 10 of the most senior and influential roles in the main retail banks, she said: “Let me be very clear that 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.”

She stressed diversity isn’t just about gender: “Many of these appointees have similar backgrounds, education and experiences. In other words, there is an acute lack of diversity in those senior roles that are central to how banks make their decisions, set their risk appetites and treat their customers. The issues identified in the banks are also evident across the financial services sector.

“We want the firms we regulate to be sufficiently diverse and inclusive, particularly at senior level, to prevent group-think, guard against overconfidence, and promote internal challenge,’’ she added.

She outlined how the Central Bank is striving to lead by example on the issue of diversity and inclusion, including gender diversity: “Today women make up almost 50 per cent of our total workforce, one third of our board, nearly 40% of our executive committee and over 40% of our leadership team.”

Source: Central Bank of Ireland.