Women in finance: keeping up the pressure for progress

Speech by Megan Butler, Director of Supervision - Investment, Wholesale and Specialists at the FCA, delivered to the Women in Finance Summit, London

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Speaker: Megan Butler, Director of Supervision - Investment, Wholesale and Specialists
Event: Women in Finance Summit, London
Delivered: 22 March 2018
Note: this is the speech as drafted and may differ from the delivered version


  • Diversity is a key supervisory issue for the FCA.
  • Firms with monocultures are significantly more likely to have governance-related issues.
  • We need to keep up the pressure on creating change.
  • Targets on gender diversity are an option for firms to consider.

When I spoke here a year ago it was pointed out that I struck a pessimistic tone when talking about the possibility of positive change towards a more diverse, open, tolerant and learning culture within financial services. But it has also been pointed out that more recently my tone seems to have changed.

Am I more optimistic?

The short answer is yes.

Having worked in this industry for 30 years without seeing much change, something has happened in the last year. A year ago, I was able to talk about the high-level sense of engagement from the leaders of some parts of financial services. Today we are seeing an even more serious and positive debate about women in finance.

Last year I was told by a senior figure in the asset management industry that gender and the diversity question was not for the regulator. I do not hear this argument any more. So my sense is that business sentiment genuinely seems to have shifted since the last year.

my sense is that business sentiment genuinely seems to have shifted since the last year.

So what has prompted this change?

Firstly, the continuing success of the Women in Finance Charter. Secondly, publication of the gender pay gap data (of which more in a moment), shining a light on some awkward statistics. Thirdly, we cannot ignore the #MeToo movement, and the growing sentiment that enough is enough in the creation of toxic environments that belittle and harm women.

Only around 13% of FCA-approved individuals in trading firms are women. A figure that rises, slightly, to 16% in investment management. The best is approximately 19% in general insurance and 18% in retail banking.

The financials of the gender pay gap

The gender pay gap is also striking. Some banks have reported gender disparities of around 50% for wages and 80% for bonuses. Others are now releasing equally bad or indeed worse data. It will make difficult reading for a number of firms. My main point this morning is therefore a simple one: we need to keep up the pressure for progress. And, for reasons I’ll come to shortly, the FCA is heavily invested in making sure this happens.

Before I do that though, there is an important point to make about why we should care. Because, in order to drive change in financial services, we cannot exclusively focus on arguments around social justice – although it is clearly a matter of social justice. We need to call out the fact that diversity is fundamental to business success and to the reduction of failure.

I appreciate that this is quite a clinical point, and not necessarily an approach that captures the public mood on gender issues right now. Quite rightly, many women (and many men) see the issue in starker terms and don’t necessarily feel it requires justification. But ultimately, in order to win minds it is also important to convey the point that diversity – including gender diversity – confers significant advantages on firms.

First, they will make more money. And I don’t just mean firms make more money by encouraging gender diversity on non-trading desks such as marketing and HR, as important as these functions are. I mean that they make more money everywhere. Including the kind of profit and loss functions typically dominated by men.

So to illustrate my point here: we know that women as investors reliably outperform men by 1.1%, with lower risk and volatility. We know that mixed-gender investment fund teams attract 6% more inflows than teams run solely by men. And we know also that a strong female presence at board level translates into significantly higher RoE for firms.

So the financials around gender diversity are pretty compelling. But the advantage does not end there. This is about more than making more money. Firms that promote gender diversity also significantly lower their conduct risk. And this is where the FCA’s interest comes in. Firms with monocultures suffer 24% more governance-related issues than their peers.

Why do we see this?

One answer is that we know that when a team includes more women, its collective intelligence rises. The other is a more general point around encouraging different perspectives to reduce the risk of groupthink. Behavioural scientists know that people tend to change their own assessments to bring them into line with those around them - a kind of social proofing.

We also know that some teams are especially prone to excessively optimistic views of their own skills. And that those teams tend to be more close-minded. A classic trait in groups that lack diversity. Gender diversity – and indeed diversity in more general terms – can help groups from converging around poor decisions.

The important point here is that most people who work within financial services are not intrinsically immoral.

You can see these poor decisions right across the risk spectrum from the financial crisis to FX market manipulation. There was a clear ethical drift in that market. What we found was a microculture on Spot FX trading desks that created, over time, an environment where unacceptable behaviour became the norm.

The important point here is that most people who work within financial services are not intrinsically immoral. So, as regulators, we need to concentrate on changing the barrel – the culture – and not just the bad apples.

Now, there are lots of reasons as to why good people do bad things – including reciprocity and herding behaviour - that were glaringly obvious in the chatroom messages we uncovered between Spot FX traders.

How and why regulators encourage diversity

For regulators this is fundamental. As a regulator we have gone beyond a mindset of compliance where rules are enough.

Last week the FCA published a Discussion Paper on transforming culture in financial services. This is part of our drive to promote a discussion and consensus on the essential features of a healthy culture within financial services. We want to raise the management of culture within firms, as a leadership discipline, to meet the level of rigour and importance as risk management and strategic planning.

We want to raise the management of culture within firms, as a leadership discipline, to meet the level of rigour and importance as risk management and strategic planning.

Prominent in this conversation is the pursuit of diversity in the workplace. A culture that pursues diversity is one that will have wider benefits for an organisation. A culture that is open minded, tolerant, considerate, and importantly, aspiring to improve.

This is a year of anniversaries: 100 years since the first step towards women’s suffrage here in the UK. But also 10 years since the financial crisis. Last weekend was the anniversary of JP Morgan’s purchase of Bear Sterns. In six months we will have the 10th anniversary of the Lehman failure. Other failures or near misses followed.

When I look back on these failures of the past and the cultures in which they grew, ’open minded’, ‘tolerant’, ‘considerate’ and ‘learning’ are not the words that come to mind.

In the UK, our focus is on the Senior Managers and Certification Regime which is transforming the culture of accountability across financial services. We see this as a step change: placing an onus on individuals to take responsibility for their actions and ensuring that those individuals are fit and proper to perform their role. In real terms, this means that our supervision teams will continue to impress on senior management the importance of diversity in their teams.

How to achieve diversity?

This requires a focus at every single level of an organisation. You cannot solve this problem by parachuting in a handful of senior women.  

So our supervisors may ask directly about gender diversity policies:

  • Are you recruiting an even split of female and male graduates?
  • Are those female graduates rising through the ranks in equal numbers? And if not, do you understand why?
  • Does equal pay and the pay gap get attention in your firm?
  • Can your business do more to promote environments that appeal to women and give them confidence?

This is not easy and there is no silver bullet. But the industry should be clear that the current pace of change on gender diversity must not just be a flash in the pan, but must be maintained. On current trends, financial services globally will not reach 50% female executive committee representation until around 2107 – two hundred years after the first suffrage march on Parliament.

We have seen a shift over the last decade on FTSE-100 boards. A change achieved, in large part, thanks to the presence of a measurable goal set by the 30% Club.

On current trends, financial services globally will not reach 50% female executive committee representation until around 2107

Now, I am conscious that targets are not universally popular - least of all with women. And this was, as it happens, a concern I shared for a number of years.

The idea of being seen to benefit from positive discrimination can be uncomfortable. The creeping progress that financial services have made over the last 20 years changed my mind.

Perhaps some firms feel they can achieve change in the long run more quickly via other means. This is their choice. It helps firms to make money and better decisions. Better decisions that can bring benefit to society, as well as cause less harm. But we will challenge on the steps being taken to achieve change, because ultimately, embracing the value of diversity benefits everyone.

The FCA approach to gender diversity

This brings me to my last point today: policy makers are not a special exception. I am proud that I work for an organisation that has a well-established commitment to diversity and inclusion. We don’t take a narrow view on this, it’s about how we reflect society and being able to bring your whole self to work. And recognition of the fact that to be effective and efficient, the FCA needs to recruit, develop and keep the most talented, engaged and diverse workforce. On top of this, we have signed up to the Women in Finance Charter – targeting 45% of our senior leadership team identifying as female by 2020. 50pc by 2025. 

We are not there yet. Our senior leadership team is 36% female and 64% male. Our gender pay gap is 19.28%. This is a differential demonstrating we still have a long way to go. The UK’s average gender pay gap is 18.1%. In finance, it’s 37.4%. But we are making progress. It is encouraging that 45% of our managers are female. And I am also pleased to report that the FCA has taken important steps in other areas. So, for example, we have tied performance-related pay to delivery of executive team objectives on diversity. We also have an Executive Board member for gender diversity – my colleague Christopher Woolard.

We will publish progress against our targets in areas like pay and diversity. And we have progressive policies in place around flexible working, parental leave and so on.


But there is more to do. The event at the President’s Club, although we did not see major financial service firms in attendance, shows how much more there is to be done and how unsafe it is to assume that the commitment to the value of diversity has safe and secure roots. We must take nothing for granted. A point underlined by the fact that one of our female supervisors was recently referred to as ‘little lady’ by a senior leader from one of the UK’s biggest banks.

My hope is that we can finally leave this sort of throwaway comment in the past.

one of our female supervisors was recently referred to as ‘little lady’ by a senior leader from one of the UK’s biggest banks.

And on a purely personal level, what I would genuinely love is that when I walk into a meeting with senior industry representatives, I am not the only woman in the room. That is why events like this are so important, and why the leadership of people here today is absolutely crucial. The work of those here today is a powerful reminder of what can be achieved, and how quickly it can be achieved, when people come together to make a difference.