Banks need to ensure that their policies reflect gender diversity and balance as required by the revised EBA Guidelines on Internal Governance and Suitability

Diversity has been a recurrent governance topic in the past years in both the regulated world and the listed entities’ sphere, apart from being one of ESG aspects under the spotlight. Diversity is generally thought of in terms of aspects such as gender, ethnicity, age, demographic or socioeconomic backgrounds. More importantly, it is about ‘diversity of thought’ or ‘cognitive diversity’, that is, having a group of people with different experiences, knowledge, attitudes and backgrounds which can offer different perspectives and enrich the Board and Management through more holistic discussions, independent opinions and constructive challenging in the process of decision-making.

A 2020 report of the European Banking Authority (“EBA”) reports that 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. It was also noted that less than two-thirds of European banks have a diversity policy despite the requirement for such a policy.[1] Against the background of this report, Frank Elderson, Vice-Chair of the Supervisory Board of the ECB and Elizabeth McCaul, member of the Supervisory Board of the ECB contend that although the journey towards diversity seems to be picking up speed, there are quite a few milestones to reach. They comment that “the European banking landscape is beginning to include more women, but progress is still too slow.” [2]

Within the context of the internal governance of banks, the EBA has constantly emphasized the need to leverage diversity for a better and richer management body.[3] The EBA Guidelines on Internal Governance (EBA/GL/2021/05) (the “IG Guidelines”) and the joint European Securities and Markets Authority (“ESMA”) and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders (EBA/GL/2021/06) (the “Suitability Guidelines”) as revised with effect from the 31 December 2021, both place specific emphasis on gender diversity and balance.

Replicated locally in the MFSA Banking Rule 24, the IG Governance introduce two complementary provisions which may require institutions to review or update their codes and policies:

  • The “no discrimination rule”: Institutions are to ensure that there is no discrimination of staff based on gender, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation; and
  • Gender-neutral policies: This includes, not limitedly, remuneration, recruitment policies, career development and succession plans, access to training and ability to apply for internal vacancies. Institutions should ensure equal opportunities for all staff independent of their genders, including with regard to career perspectives and aim to improve the representation of the underrepresented gender in positions within the Board and Executive Management as well as in the group of staff considered as material risk takers (“identified staff”).[4]

The IG Guidelines indicate that these measures are separate from other obligations relating to gender pay such as the fact that institutions should monitor the development of the gender pay gap[5] separately for identified staff, members of Executive Management, members of the Board and other staff. This is addressed in the EBA Guidelines on sound remuneration policies under Directive 2013/36/EU (EBA/GL/2021/04), likewise revised as from 31 December 2021 in line with CRDV and locally included in the MFSA Banking Rule 21.

Diversity has always been one of the factors to be considered when selecting and assessing members of management bodies and the 2017 Suitability Guidelines had stressed the importance of a gender-balanced composition of the management body. The revised version of the Guidelines goes one step further by calling upon institutions to ensure an appropriate representation of all genders within the management body and that the principle of equal opportunities is respected when selecting members of the management body, without setting out a minimum representation threshold. Against this background, one should also keep in view the disclosure obligation imposed on significant banks contained in Article 435(2)(c) of the CRR[6] regarding the publication of the target for the representation of the underrepresented gender in the board of directors and the implementation of the policy on how to increase the number of the underrepresented gender in the board in order to meet that target.[7]

The relative provisions in the Suitability Guidelines are aimed at fostering a more gender-balanced composition and generally a more gender-balanced pool of candidates for positions within the Board and Senior Management and these are considerations which need to be included within a bank’s Board and Senior Management diversity policy. Similarly, the diversity policy for staff needs to address career planning aspects and measures to ensure equal treatment and opportunities for staff of different genders. Banks are therefore called upon to ensure that appropriate gender representation is taken into account when selecting staff for management positions as well as when providing management training.

There is no doubt that gender balance and diversity in general as well as inclusion have become and will continue, more than ever, to be critical components of the financial services sector regulatory framework. The key consideration in measures such as those within the EBA Guidelines appears to be a correlation between insufficient diversity and groupthink, with the ultimate goal being a safer and sounder industry through better internal governance.

__

[1] EBA report on the benchmarking of diversity practices at European Union level under ARTICLE 91(11) OF DIRECTIVE 2013/36/EU (2018 DATA): https://www.eba.europa.eu/sites/default/documents/files/document_library/News%20and%20Press/Press%20Room/Press%20Releases/2020/EBA%20calls%20for%20measures%20to%20ensure%20a%20more%20balanced%20composition%20of%20management%20bodies%20in%20institutions/EBA%20report%20on%20the%20benchmarking%20of%20diversity%20practices.pdf

[2] ECB Banking Supervision seeking greater diversity within banks: https://www.bankingsupervision.europa.eu/press/blog/2021/html/ssm.blog210615~31020cb68d.en.html

[3] Throughout this article, unless otherwise, stated “management body” shall mean the Board of Directors and Executive or Senior Management.

[4] Commission Delegated Regulation (EU) 2021/923 of 25 March 2021 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards setting out the criteria to define managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and setting out criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff referred to in Article 92(3) of that Directive

[5] Gender pay gap means the difference between the average gross hourly earnings of men and women expressed as a percentage of the average gross hourly earnings of men.

[6] Regulation (EU) No 575/2013 of the European Parliament and the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012

[7] See also para. 103 of the IG Guidelines and para. 86 of MFSA Banking Rule 24.

'Credit & Financial Institutions' Related News Articles

01
Bank of Valletta has supported this year’s opera by Gioachino Rossini – ‘Armida’
Bank of Valletta

by Bank of Valletta

18th March 2024

Changing the terms of a credit agreement and forbearance policies and measures: new obligations on lenders in consumer and residential property credit agreements
Ganado Advocates

by Ganado Advocates

23rd February 2024

The HSBC Malta Foundation supports Three-Year UM Research Project through RIDT
HSBC Bank Malta p.l.c.

by HSBC Bank Malta p.l.c.

19th February 2024

BOV RETROSPECTIVE EXHIBITION FEATURING WORKS BY NOEL GALEA BASON OFFICIALLY INAUGURATED
Bank of Valletta

by Bank of Valletta

17th January 2024

Goal-line Defenders: Scoring Victory Against Financial Crime with the Three Lines of AML/CFT Defence
CSB Group

by CSB Group

12th January 2024

Agreement reached on the establishment of the Anti-Money Laundering Authority (“AMLA”)
Ganado Advocates

by Ganado Advocates

3rd January 2024

FIAU Thematic Review on Company Service Providers when providing Company Formation Services
Ganado Advocates

by Ganado Advocates

3rd January 2024

Directive 93/13/EEC and mandatory statutory or regulatory provisions in consumer contracts
Ganado Advocates

by Ganado Advocates

3rd January 2024

MiCA Update: Consultation Process on the Proposed Updates to Chapter 3 of the VFA Rulebook
Ganado Advocates

by Ganado Advocates

1st November 2023

Continuing to disclose the topic EU funding for Startups ¦ Startup Definition
Griffiths + Associates Ltd

by Griffiths + Associates Ltd

31st October 2023

EU Court’s Landmark Ruling: Restricting Financial Ties to Combat Money Laundering and Terrorism Financing
Ganado Advocates

by Ganado Advocates

16th August 2023

ESMA issues public statement in relation to sustainability disclosures in prospectuses
Ganado Advocates

by Ganado Advocates

16th August 2023

The new notified PIFs framework: MFSA publishes consultation document on regulatory changes
Ganado Advocates

by Ganado Advocates

26th May 2023

BOV Asset Management Limited launches the Global Multi-Asset Thematic 60 Fund managed by Fidelity International
Bank of Valletta

by Bank of Valletta

7th May 2023

INFOCREDIT GROUP AMONG THE SPONSORS OF MALTA FINANCIAL CRIME COMPLIANCE CONFERENCE 2023
Infocredit Group Limited

by Infocredit Group Limited

3rd May 2023

The classification of cryptoassets under the new Markets in Crypto-Assets Regulation
Ganado Advocates

by Ganado Advocates

24th February 2023

Welcome to “Enterprise Innovation” ¦ 23 February 2023 at Salini Resort Hotel
Griffiths + Associates Ltd

by Griffiths + Associates Ltd

20th February 2023

Bank of Valletta organises business breakfast on the Climate Challenges and Opportunities for Real Estate
Bank of Valletta

by Bank of Valletta

31st January 2023

BOV participates in Ġemma and MBA’s pilot project to promote financial literacy courses for elderly
Bank of Valletta

by Bank of Valletta

27th December 2022

High calibre international speakers for FinanceMalta’s 15th Annual Conference
FinanceMalta

by FinanceMalta

28th October 2022

H.E. Sheikh Feisal Bin Qassim Al Thani celebrates BNF Bank’s success in latest visit to Malta
BNF Bank plc

by BNF Bank plc

6th October 2022

The Changes to the Structure and Competencies of the European Supervisory Authorities (ESAS)
CSB Group

by CSB Group

31st August 2022

INSIGHT Interview: Alan Cuschieri, Founder of Moneybase
FinanceMalta

by FinanceMalta

5th August 2022

Member Spotlight: Fyorin
FinanceMalta

by FinanceMalta

5th August 2022

PrimeGlobal Named Association of the Year 2022 at IAB Awards ¦ Winning in Business with Advisory Culture.
Griffiths + Associates Ltd

by Griffiths + Associates Ltd

25th July 2022

BNF Bank launches a Credit Card Campaign with chance to win once-in-a-lifetime World Cup experience
BNF Bank plc

by BNF Bank plc

14th July 2022

BOV Asset Management launches the sixth reading of the Investor Sentiment Index for Malta.
Bank of Valletta

by Bank of Valletta

3rd June 2022

Infocredit Group shortlisted as ‘Credit Information Provider of the Year ‘at Credit Awards 2022!
Infocredit Group Limited

by Infocredit Group Limited

19th May 2022

14th International Taxation Conference l organized by the Malta Academy for Taxation Studies & the Malta Institute of Management l 3rd May 2022
Griffiths + Associates Ltd

by Griffiths + Associates Ltd

3rd May 2022

Infocredit Group sponsors the Webinar “AML, Sanctions and Embargoes: Understanding the risks and learn how to mitigate them”, organized by FEBIS
Infocredit Group Limited

by Infocredit Group Limited

28th April 2022

Free Webinar from Infocredit Group: “Transforming Consumer Creditworthiness and Affordability with the help of PSD2”
Infocredit Group Limited

by Infocredit Group Limited

8th April 2022

Infocredit Group and MACM join forces to support the Maltese Business Community with Innovative Credit Risk Management and Compliance Solutions
Infocredit Group Limited

by Infocredit Group Limited

8th April 2022

BNF Bank wins again The Banker, ‘Bank of the Year 2021’ Award for 2nd Consecutive Year
BNF Bank plc

by BNF Bank plc

3rd December 2021

Member Spotlight – Trust Stamp: Advancing Financial Inclusion in Emerging Markets from Malta
FinanceMalta

by FinanceMalta

8th July 2021

Member Spotlight – Borg Galea & Associates: Boutique Accounting Firm with Plans to Scale Up
FinanceMalta

by FinanceMalta

8th July 2021

Growth in contribution to the Gross Value Added (GVA), as well as in employment within Malta’s financial services industry according to the MFSA’s 2020 Annual Report
FinanceMalta

by FinanceMalta

18th June 2021

SAXO Bank Chief Economist optimistic for recovery in Malta’s Trade, Transport and Tourism
Bank of Valletta

by Bank of Valletta

25th May 2021

The future of Trade, Transport and Tourism in Malta – a business webinar by BOV, Saxo Bank and Malta Maritime Forum
Bank of Valletta

by Bank of Valletta

17th May 2021

2021 Industry Outlook – Analysis of how sectors are positioned for recovery
Western Union Business Solutions

by Western Union Business Solutions

5th February 2021

BOV Staff donate 300 boxes of food and € 5,000 to the Foodbank Lifeline Foundation and St Jeanne Antide Foundation
Bank of Valletta

by Bank of Valletta

4th January 2021

Bank of Valletta to launch Energy Efficiency and Renewable Energy Financing Product
Bank of Valletta

by Bank of Valletta

18th December 2020

What to expect: BOV, Malta Chamber and Saxo Bank debate on the future of businesses
Bank of Valletta

by Bank of Valletta

29th September 2020

Blue Sky or Eye of the Storm? A Free webinar for Businesses by BOV, Malta Chamber and Saxo Bank
Bank of Valletta

by Bank of Valletta

14th September 2020

Internal Governance considerations for credit institutions: the EBA report on the 2019 supervisory convergence plan
Ganado Advocates

by Ganado Advocates

17th July 2020