While gender diversity at the senior level in European banks is improving, there is still a long way to go to gender parity.
Research by DBRS Morningstar, using a sample of 43 European banks, has shown that women represented an average 37% of board member seats in 2021. That percentage decreased to 26% when considering women on executive management teams. Only five of the 43 banks had a female CEO and only four had a female chair of the board.
Gender diversity at board level was found to be gradually improving, from 22% in 2014 to 37% in 2021, but is inconsistent across different countries. For example, Nordic states head the list with Denmark leading the field at 55%. Germany and Portugal have the lowest female board representation at 29% and 23%, respectively.
Norway, France, Italy and Spain require listed companies of a certain size to have at least 40% female board representation. Germany and the Netherlands require 30% minimum female board representation. Failure to comply can result in a fine or a bank can be required to keep the board seat vacant until filled by a woman.
The research concluded that:
- state-imposed gender quotas at board level seem to have had a positive effect; and
- further action is needed in order to achieve improved gender parity across leadership roles.
DBRS Morningstar found that women, on average, occupy 26% of executive leadership roles within European banks in 2021.
Only five banks in the sample had 40% or more women in executive leadership roles. Nationwide had the highest number of women on its executive team at 67%, followed by DNB and Rabobank, both at 50%. Nationwide and DNB are two of the five banks that have female CEOs. DNB is the only bank in the sample that had both a female CEO and female chair of the board in 2021, and a 50% gender diversity split on its board and on its executive management team.
Importantly, the research found a positive correlation between female board representation and credit ratings for the sample of banks. For example, women represented on average 40% of board seats for banks rated in the AA to A range compared to only 30% for banks rated BB or lower. Similar trends were found when considering the level of representation of women in executive roles.
Pressure on the financial services sector to improve diversity, equity and inclusion (DEI) more generally has increased in recent years.
In July 2021, the Financial Conduct Authority (FCA), Prudential Regulation Authority and Bank of England published a discussion paper to kickstart discussion on how the financial services sector, with the help of regulators, can “accelerate the pace of meaningful change” to improve DEI in the sector.
Since April, the FCA has required listed companies to disclose information about how they are performing against targets, including 40% female representation on their board.
The situation faced by many UK finance workers from black and minority ethnic backgrounds remains a major issue according to evidence collected by reboot, a network of senior professionals drawn from some of the City of London’s biggest firms, which in 2021 surveyed 800 employees from 440 companies with more than £1.4tn in combined annual revenue. It found:
- 66% reported having experienced race discrimination at work as a result of their background;
- 28% said race discrimination was holding back their career; and
- 41% said they thought their employers were failing to demonstrate a full commitment to creating an inclusive work environment.
In July 2021, the FCA found that fewer than one in 10 management roles were held by black, Asian or other ethnic minority staff. The FCA expressed concern that this deeply unsatisfactory situation was showing signs of getting worse. Limited progress by firms on social mobility was also noted.
some banks are using apprenticeships to help combat the UK’s declining rate of social mobility
Some banks are using apprenticeships to help combat the UK’s declining rate of social mobility. For example, Metro Bank’s apprenticeship programme requires 50% of their apprentices to be recruited from the 40% most deprived communities.
The advances being made on gender diversity at board level, though a work in progress, show what can be achieved using targets/quotas and the necessary level of determination at a bank from the top and throughout the entire business. The same approach, with ‘sticks’ balanced by rewards, is needed now if the sector is also serious about improving gender parity across leadership roles, the working conditions of black and minority ethnic employees, social mobility and DEI more generally.
Raymond Silverstein is partner and head of employment, London, at legal firm Browne Jacobson.
