Women as Central Bankers and Bankers …Can they help get more respect for banking/finance?

Post-appointment of Janet Yellen as Fed chief, there have been a few articles questioning why there are few women in central banks?

  • Claudia Goldin of Harvard has asked in a different tone, will the appointment get more women interested in economics? She points economics is not a popular major amidst women..
  • Meanwhile, Karnit Flug has also been appointed as head of Bank of Israel. She was already acting as a chief post retirement of Stanley Fischer as the cabinet hunted for a more eligible person (read male). As cabinet could not get someone, they finally appointed Flug
  • Paola Subacchi (Research Director of International Economics at Chatham House, London) chips in a recent column on the issue. She calls this male dominated central banking industry as the  last gentleman’s club. She adds there are 17 countries where we have women central bank heads Malaysia, Russia, Argentina, South Africa, Lesotho, and Botswana – but they are just exceptions..Both Yellen and Flug were appointed as there was no suitable male candidate.. She also points to this interesting tale of Yves Mersch appointment on ECB board:

Yellen’s appointment is particularly important, because she breaks the glass ceiling in the advanced economies. Until her promotion, no member of the G-7 had a woman heading its central bank.

Moreover, men occupy all 23 seats on the European Central Bank’s (ECB) Governing Council. Since the Bank of England’s Monetary Policy Committee was established in 1997, only three women have been appointed as external members – and no woman has even been nominated since 2002. The Bank of Japan has only one woman on its Policy Board.  Women, nowadays, are more likely to occupy top political jobs. Angela Merkel was recently reelected for a third term as German Chancellor; Britain’s voters elected Margaret Thatcher three times as Prime Minister; and France has had a female prime minister. But no woman has come close to leading these countries’ central banks.

Equality seems to have eluded central banks even in gender-conscious Scandinavia. For example, Norway, which has been promoting positive gender discrimination for years and recently elected Erna Solberg as its first female prime minister, has yet to allow a woman to control the purse strings – at either the central bank or the finance ministry, with its powerful sovereign wealth fund.

Recent attempts to compel change have been counter-productive. In an effort to promote diversity and gender equality in the ECB, the European Parliament in 2012 blocked the appointment of Luxembourg’s Yves Mersch to the bank’s executive board. But MEPs then failed to propose a plausible female alternative, leaving the ECB understaffed for weeks during the eurozone sovereign-debt crisis.

Unsurprisingly, the European Parliament’s handling of Mersch’s appointment was widely ridiculed, and his nomination was eventually confirmed. But many people drew the wrong conclusion from the episode, which they viewed as affirming the idea that competence and experience must always trump ill-conceived ideas about positive discrimination. If there are no suitable female candidates, it was argued, then the best candidate should prevail, regardless of gender.

  • Interestingly, in India Arundhati Bhattacharya has been appointed as head of SBI, India’s largest commercial bank. Tamal of Mint also points how many banks in India are headed by women. He throws some interesting stats:

In the Reserve Bank of India (RBI), it was a 68-year wait for a woman to reach the deputy governor’s post. The central bank traditionally has one governor and three to four deputy governors to formulate monetary policy and run the banking system. RBI’s first woman deputy governor, Kishori J. Udeshi, took over in June 2003. Subsequently, two more women reached this tier—Usha Thorat and Shyamala Gopinath.

Against this backdrop, the State Bank of India’s wait of 206 years to get its first woman chairperson has been a bit longer. With Arundhati Bhattacharya, 57, moving into the corner office at the nation’s largest lender, women chief executive officers (CEOs) now control close to 40% of India’s banking industry assets. This is an interesting piece of information as women’s representation in the executive cadre of public sector banks, which account for about 70% of India’s banking industry assets, is less than 3%. They make up about 17% of the total workforce in the state-run banks. While their representation in the clerical cadre is a little over 26%, about 11% of officers in the industry are women. In private banks, the scene is somewhat better. For instance, in ICICI Bank Ltd, the nation’s largest private sector lender, women employees constitute roughly one-third of the workforce.

Right now, women CEOs are managing four state-run banks, taking the total number to seven in the 44 years since India nationalized most of its privately run banks in 1969. It took 31 years after nationalization for a woman to become a bank’s CEO, but the pace of female professionals advancing to the top post has gained momentum since then. Very soon we will see one more woman boss in Usha Ananthasubramanian, an executive director of Punjab National Bank, when she takes over as chief of Bhartiya Mahila Bank, which is set to launch its operations in November. After that, there won’t be too many women advancing to the top as the pipeline is drying up. There is only one woman executive director in the state-run banking industry now—Krishna Guha, in Dena Bank.

There are not too many women in the top executive cadre—general managers—in the state-run banking industry. Overall, there are only 36 women among 630 general managers across banks. State Bank of India has the maximum number of women general managers—16 out of 138; Bank of Baroda, Canara Bank and Indian Overseas Bank have three each; and Punjab National Bank and Union Bank of India have two each. There are quite a few state-run banks where no woman is among the top executive cadre.

He points how some banks have made women friendly policies like ICICI Bank..India is also likely to start its women centric bank in Nov-13…

Most people ask these questions in terms of power equations between males and females. There is little doubt that this banking business has been a male club. But this is the case with most professions and is not limited to just economics and finance. Infact the way this world is run it is unlikely it is going to bring more women into profession..

I however want to ask a different question and more of a request.

The qs are not in any order and apply either to both bankers and c-bankers or to one of them:

  • Now that we have some kind of start, can these women central bankers/bankers bring more respect to central banking/banking industry?
  • Can they make this an industry which is less risk-seeking and less greedy?
  • Can they shift the focus of banking from the testosterone driven trading and speculation activity to a more purposeful financial intermediation activity?
  • Can they look beyond the rational school to a more useful behavioral school which respects the several biases in human beings? This will make the subject more interesting and real..Why would women want to enter an industry which is unreal and getting even more  unreal over the years.
  • Can these central bankers look beyond making monetary policy just for the banker’s club and focus instead on public at large?
  • Can efforts be made to make women understand how monetary policy helps? How about conducting the next mon pol meeting not amidst bankers club but amidst a women’s club explaining the nuances of mon pol?

I can go on. But I guess have provided a basic sense of things. Am hopeful this will drive more women to the profession..

I have worked with some really talented women in my short career in financial industry. Their understanding of things is second to none. Collectively they can surely make a difference to this crazy and mean world of banking. Like a woman who balances the family really well, we need women bankers to bring some balance to the world of banking where greed dominates over everything else. Much of finance is about common sense, balance and patience a virtue most women have. It is not about the fancy things we see and associate finance with..

Subachi says at the end:

If gender is a proxy for diversity, then central banks fail a basic test of it. Promoting diversity – not only in terms of gender, but also with respect to age and, in many countries, ethnic background – is a matter of effectiveness as much as a question of social justice. A broader, more transparent recruitment process would reduce groupthink, challenge the status quo, and, one hopes, leave central banks better equipped to handle a financial crisis. The promotion of Yellen and Flug is a good start; now the doors of these fusty male-dominated clubs must be flung wide open.

The purpose needs to be much broader than that…Apart from fixing the gender equation we need women to change the industry as a whole..

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