Central Bank of Ireland criticises banks for gender imbalance

The Central Bank of Ireland has criticised some of the country’s largest banks for the gender imbalances among their most senior roles.

As part of its review into the behaviour and culture of the Irish retail banks, the central bank analysed the internal makeup of banks’ personnel with a view to understanding the diversity of the institutions.

“Between 2012 and 2016, 80% of senior appointments made in the financial institutions operating in Ireland were men, with a high of 84% male applicants in 2012 decreasing to 78% of male applicants in both 2016 and 2017,” the central bank’s results show.

The review was conducted in conjunction with the Netherlands Bank and surveyed AIB Group, Bank of Ireland Group, Permanent TSB, Ulster Bank Ireland and KBC Bank Ireland.

Among roles the central bank terms “the most senior” and “revenue-generating”, a gender imbalance is even more evident. These roles, the central bank says, are crucial to how banks make their decisions, set their risk appetites and treat their customers.

But the central bank’s concern does not stop at gender, and extends to a general lack of diversity at its large retail banks.

“Research suggests that diversity at senior levels can help to reduce the likelihood of group-think, improve decision-making, increase the level of challenge, and improve risk management,” the review says.

The bank believes a lack of diverse thinking is partly to blame for the 2008 financial crisis. Today’s lack of diversity among bank’s senior roles is therefore a leading indicator of “elevated behaviour and culture risk”.

Failing to tackle the issue now, the central bank says, could threaten financial stability in the future.

Banks in Ireland have begun to address the issue. The central bank praises initial efforts where there was “a clear recognition of risks associated with lack of diversity and inclusion”. A number of banks have committed at the board level to address these risks.

“However, there is an inconsistency in the ambition and maturity of the approaches being taken,” the review says, and the central bank has issued a warning to banks that more needs to be done.

Both the central bank and European Banking Authority have clear requirements for firms to take into account and adopt a specific diversity policy. “The central bank’s expectations are not consistently being met,” the review says.

As a result, the regulator has decided to meet with each of the five banks to communicate its expectations in terms of meeting diversity requirements, which includes a clear action plan to “enhance the levels of diversity”.

However, the central bank has said it expects firms to “move beyond” the minimum compliance-driven approach.

“In the absence of improvements in diversity and inclusion at senior levels in regulated financial services providers, the central bank will consider whether it is necessary to put further specific requirements in place,” the review says.