Could the financial crisis have been stopped by appointing women to senior supervisory roles? Martin Čihák thinks it could have been a possibility.
“What we have observed is that having more women lowers your risk of a crisis or exposure to financial sector risk,” he tells Central Banking in the latest Womenomics podcast.
“Based on the data we have, countries which had more women at board level within their financial institutions were more isolated from stress.”
The findings are the result of a study conducted by Čihák and his colleague Ratna Sahay, deputy director of the monetary and capital markets department at the IMF, into why women are underrepresented in all areas of the global financial system.
From depositors and borrowers, to bank boards and regulators, women are yet to find their place at the table. But the greater inclusion of women, as both users and providers, has benefits beyond addressing gender inequality, the research finds.
“Narrowing the gender gap would foster greater stability in the banking system and enhance economic growth,” says Čihák. “It could also contribute to more effective monetary and fiscal policy.”
Not wanting to overstress the results, Čihák is reluctant to admit women alone could have stopped the financial crisis but he does agree there is a strong correlation between the appearance of women at the top of financial institutions and greater financial stability.
“We looked at banks against a whole range of stability indicators, including the level of non-performing loans and other riskiness factors, and found those institutions with more stability had a greater proportion of women,” he says.
One of the reasons for this could be women are more risk averse and thus are more cautious when it comes to supervision, but Čihák believes a reduction of groupthink is a more likely explanation.
“When you increase the diversity of a board, be that through gender or race, you introduce a new set of ideas and thus will be better at decision-making,” he says.
“Equally, due to inherent bias in the hiring process, the women which are hired to financial firms are generally better than the men.”
1:42 Analysing the gender gap
4:40 Sourcing better data
6:30 Women equal stability
11:15 Could women have stopped the financial crisis?
15:50 IMF efforts
18:20 National financial inclusion strategies
- Demonetisation backer becomes new RBI governor
- Kohn ‘deeply’ worried Fed might not have support to fight next crisis
- Central banks turn to visual communication in 2018
- Indian governor resigns after conflict with government
- Book notes: Macroprudential policy and practice, edited by Paul Mizen, Margarita Rubio and Philip Turner