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15 June 2021

ECB Banking Supervision seeking greater diversity within banks

Blog post by Frank Elderson, Vice-Chair of the Supervisory Board of the ECB, and Elizabeth McCaul, Member of the Supervisory Board of the ECB

At the beginning of this year, two German banks appointed women to their management boards for the first time since they were founded over 100 years ago. This decision is another step in the global journey towards diversifying banks’ management bodies, where female representation is growing. Last year, a global US bank made history when it appointed the first female CEO of a major Wall Street firm.

A look beyond the headlines, though, suggests there is much more to do. According to the European Banking Authority (EBA), only 8% of CEOs of European credit and investment institutions are women; and only around a fifth of the positions in the management bodies of Europe’s largest banks are held by women. Women on management boards of most institutions also continue to be paid less. And although European law requires banks to have a diversity policy, less than two-thirds of them actually do.[1]

With these findings in mind, the European Central Bank (ECB) today launched a public consultation on a draft version of its revised and more comprehensive Guide to fit and proper assessments. The new version of the Guide introduces some additional dimensions to the ECB’s assessment of the collective suitability of bank boards. One of these new dimensions is aimed at fostering gender diversity within the boards of European banks.

The revised Guide has two main objectives. The first is to explain in greater detail the existing policies applied by the ECB when assessing the suitability of members of the management bodies of significant banks. The second is to introduce and explain the enhanced supervisory expectations regarding the collective suitability of boards, the individual accountability of board members and the new criteria that will be used to reassess them. This enhanced approach to fit and proper supervision marks another step in the ECB’s efforts to promote diversity within the management bodies of European banks as a necessary condition for the sounder governance of credit institutions and thus a safer financial system.

From now on, in addition to assessing the adequacy of collective knowledge, skills and experience when determining whether a bank’s management body as a whole is suited to effectively steer a bank, the ECB will also look closely at the sufficiency of gender diversity of bank boards.

In this blog post, we will reiterate some of the benefits that diverse boards bring to organisations and describe some of the upcoming measures that ECB Banking Supervision is planning to implement to help ensure that European bank boards are diverse.

Diversity leads to good governance

Effective, independent boards are the cornerstone of sound organisational governance. Broadly speaking, boards are expected to provide effective oversight of a bank’s strategy and operations, challenging these when deemed necessary. They are also expected to promote responsible decision-making and mitigate the risks that banks face at any given moment. Ultimately, a bank’s resilience hinges on it having well-defined lines of responsibility and effective risk management practices, as well as checks and balances at all levels – starting with the board.

Diversity in leadership has long been recognised as crucial for effective governance.[2] It fosters independence of opinions and the openness to critically challenge management decisions. Boards that are composed of members sufficiently diverse in gender, age, geographical provenance, and educational and professional background incorporate a richer set of information, experiences and values – and this results in better decision-making and greater efficiency in the way banks operate.[3]

A diverse board is also better equipped to understand its stakeholders and its employees, as well as customers with varied backgrounds, which can help expand its customer base. Recent evidence gathered by the EBA also suggests that more diverse management boards are more likely to achieve higher returns.[4]

European legislation recognises the benefits of diversity in bank boards. The Capital Requirements Directive[5] explicitly requires credit institutions to use diversity as one of the criteria when appointing members of management bodies and to promote diversity through recruitment. Institutions are formally required to have a diversity policy and to take action if gender diversity remains below a certain threshold.[6]

The ECB’s efforts to promote diversity

The ECB supports diversity and its promotion within the management bodies of the banks under our supervision. Since 2014 the ECB has been responsible for taking decisions on the appointment of all members of the management bodies of the significant banks that fall under its direct supervision. Since its inception, ECB Banking Supervision has directly intertwined the fit and proper assessment – including findings on diversity – with day-to-day supervision through different channels. First, failures to respect self-imposed gender targets are brought to a bank’s attention as part of ongoing supervision. Second, diversity-related deficiencies identified during fit and proper assessments feed into the governance assessments included in the annual Supervisory Review and Evaluation Process.

These actions have borne results. Progress has been made in Europe in recent years regarding bank governance, with ECB Banking Supervision raising the bar in terms of what is expected of bank boards. Since 2015, the representation of women has gradually increased, but change is slow to take hold and more clearly needs to be done.

In this context, and to continue our broader work on diversity, we decided to further strengthen and streamline the assessment of diversity as a component of collective suitability whenever national legislation allows us to do so.

In Member States where national law requires institutions to make appointments in line with their internal policies or to have a fixed percentage of female members of the management body, the ECB will make a recommendation or impose an obligation in the fit and proper decision to respect gender targets in current or upcoming appointments. Furthermore, in the new fit and proper questionnaire we will ask institutions whether they have any targets for diversity and whether they are meeting them. Whenever targets are not met, we will issue recommendations to remedy such imbalances. If there are manifest breaches of diversity strategies, we may need to obligate banks to comply with these strategies.

We will also provide more clarity regarding our expectations on gender diversity and diversity more generally, so that banks know where they stand in relation to where we’d like them to be, and in which specific areas they need to make progress. In cooperation with the national competent authorities, we will further develop policies and roll out other medium and long-term supervisory measures aimed at fostering diversity within the boards of European banks.


Diversity in leadership has long been recognised as crucial for effective governance – be it diversity of experience, skills, values, gender or any other dimension. We also recognise that diversity is not limited to gender and that people differ in terms of nationality, religion, sexual orientation, ethnic origin, age, disability and cultural background. In Europe, the more diverse a bank board is, the more open, balanced and robust its decision-making processes are, and the more efficient, resilient and profitable the bank is likely to be.

As we enter the third decade of the century, the journey towards diversity seems to be picking up speed. But we still have quite a few milestones to reach. Since our inception, we have pushed for more diversity in the management bodies of European banks through our ongoing supervision. The European banking landscape is beginning to include more women, but progress is still too slow. This is why the ECB is taking concrete steps as part of its supervisory mandate to promote more diverse boards and more diverse banks, across all dimensions. The launch of this public consultation on an enhanced approach to fit and proper supervision is just the latest example.

We will continue to closely monitor banks’ progress in meeting diversity targets, and stand ready to adjust the Guide to fit and proper assessments – as well as any other aspects of our ongoing supervision – to the lessons learned in this area.

In our joint efforts, the goal is clear: that our institution, the banks that we supervise and financial institutions at large become more effective and safer, and that they are a true reflection of the population that they ultimately serve – the people of Europe.


A shorter version of this blog post was published as an opinion piece in Les Echos (France), Handelsblatt (Germany), Il Sole 24 Ore (Italy), Het Financieele Dagblad (Netherlands), Cinco Días (Spain).

[2]See, for example, The de Larosière Group (2009), “Report of the High-level group on financial supervision in the EU”, Brussels.
[3]See, for example, García-Meca, E. et al. (2015), “Board diversity and its effects on bank performance: An international analysis”, Journal of Banking & Finance, Vol. 15, April, pp. 202-214; and European Banking Authority (2020), op. cit.
[4]See European Banking Authority (2020), op. cit.
[5]Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).
[6]See Recital 60, Article 88(2) and Article 91(10) of the Capital Requirements Directive.


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