Policy changes alone will not fast-track women to senior positions

Focus on the pipeline and culture, say financial sector experts

The benefits of more diverse and gender-balanced leadership teams are clearly documented. Gender balance in leadership leads to more stability and growth, and avoids groupthink. So why do we still see so few women in the top ranks of financial institutions?

The need to strengthen the pipeline of leadership was one of the key messages emerging from recent OMFIF events discussing the improvement of gender parity in senior financial positions. Participants also noted that introducing measures alone is not enough and that ‘it’s about culture and not just policies’.

‘Pipeline, pipeline, pipeline’

Taking ‘good care of the pipeline and avoiding leaks’ is paramount to ensure gender balance in financial institutions, according to Helena Adegas, board member at Banco de Portugal, when speaking at the Gender Balance Index 2024 launch. Other panellists agreed, citing that any progress can only be maintained if the pipeline is strong.

The GBI tracks gender parity in senior leadership positions across central banks, commercial banks, pension funds and sovereign funds. The index also includes the two layers of senior leadership below – senior staff and C-suite members. This offers an overview of the pipeline for future leadership at these institutions. In the 2024 edition of the report, the share of women across all senior staff roles in the index has increased to 31% from 29% in 2022. But going up the ladder of seniority, we see fewer and fewer women, with only 26% at the deputy governor or C-suite level and only 16% in the top ranks (Figure 1).

Figure 1. Pool of female talent is growing

Share of women in senior roles, %

Source: OMFIF GBI 2022-24

This finding echoed panellists’ views that gender balance is better at the recruitment stage – specifically in entry-level and junior roles where the pipeline starts. Wylie Tollette, chief investment officer at Franklin Templeton Investment Solutions noted that, at the junior levels, they ‘have made good progress, but getting women to the top of the organisation is more challenging’.

Improvement at the junior level also requires a conscious effort. Saoirse O’Connor, head of Irish portfolio monitoring at Ireland Strategic Investment Fund stated that the fund has policies to ensure 50-50 representation of women and men at the interview stage: ‘Even though we get less women applying for jobs, we use the network within our organisation, promote it on social media to reach spaces which we don’t see’.

Looking to improve the retention of female staff needs to become a priority. A speaker from the UK’s Financial Conduct Authority at another roundtable in London on advancing gender balance in Commonwealth financial institutions, added that mentorship schemes at the organisation can facilitate this development. Adegas also noted that, ‘gender balance only brings better decision-making if this diversity is real – and if women don’t feel the pressure to behave like men. That is helped if we have more role models [in leadership] that younger females in the organisation can follow.’ Fostering both a supportive and authentic workplace culture serves as a meaningful force for change.

‘Policies are important, but it is important to change the culture’

The parenthood effect can also have a detrimental impact on the retention of talent, and subsequently for gender balance. Parental leave policies offered at financial institutions were a prominent topic of discussion, with a key barrier to women’s career progression being their childcare and caregiving responsibilities. Tollette noted that it is important to get ‘capable women back up to speed after maternity leave’. He added that the perception generally is that as male colleagues don’t take time off, women feel they are behind when they return to work.

Central banks are the most equipped when it comes to policies related to easing the burden of care, such as parental leave, flexible leave and child support. A representative from the Bank of England at a roundtable mentioned that the Bank ‘wants to be a market leader [in diversity and inclusion policies], pursuing initiatives like equal paternity leave’. However, not all central banks are on the same page.

The 2023 GBI whch included a survey of central banks’ policies, revealed that all 46 banks that took part in the survey have a maternity leave policy, which at minimum adheres to the legal requirements in respective countries. On the other hand, paternity leave policies leave something to be desired. The vast majority (83%) of banks offer up to – or less than – three months of paid paternity leave. In contrast, 59% offer at least six months of paid maternity leave.

Central banks and other financial institutions have also improved on their remote working policies according to the same survey, as 96% of the respondents offer some form of flexible work options. Such policies have been greatly beneficial for the retention of female talent by giving ‘autonomy of place and time’, according to O’Connor. Flexible work policies also go a long way in balancing the burden of care between partners, which has positive implications for women returning to work and progressing to senior leadership roles in financial institutions.

Cultural changes are as – if not – more important as policy changes to improve gender balance. This was reiterated by participants at the roundtable held in Washington DC, where they noted that incremental changes can have nearly as big of an impact as major policy shifts. For instance, men in senior leadership taking their full entitlement of parental leave or taking advantage of flexible working policies to take on caregiving responsibilities, can be an example to others in the organisation – thereby improving the culture.

Culture and context can also impact gender balance through buy-in from politicians. Ultimately, most senior leaders in central banks are political appointments, chosen by governments and parliaments. As a result, better understanding and the presence of gender balance within the institutions can filter through to other public sector organisations.

In the various events OMFIF has hosted on this topic, the main finding was that while there is volatility in the short term, it seems that the trend is moving in the right direction in the long run. To ensure this momentum, institutions need to strengthen pipelines by not just implementing policies that avoid leaks, but also contribute to cultural change. What emerges is that a shift in mindsets will go a long way in moving the needle on gender balance in the financial sector.

Arunima Sharan is Senior Research Analyst, Economic and Monetary Institute at OMFIF.

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