Old Boys Club
As Mark Carney prepares to move to the Old Lady of Threadneedle Street, we think about the absence of women in central banking circles.
Last week, UK Chancellor George Osborne announced the successful poaching of Mark Carney to lead the Bank of England (BoE) starting next year. The surprise announcement came after Carney himself denied consideration for the job earlier this year. As the global financial community digests the news, a recent CBC Radio One interview reflects on the long-standing gender imbalances inside central banking. In a chat with host Michael Enright, Oxford Analytica’s Dr. Stephanie Hare talks about the pervasive ‘old boys club’:
Women are not very well represented in central banking anyways. I think you’ll find that 6.3 percent of central bankers worldwide are women. […] I would say it’s definitely fair [to refer to central banking as a gentlemen’s club]. That’s probably true of finance generally, particularly the world of monetary policy. And particularly here in Britain.The City, which is the financial district here in London, is very traditionally male-dominated. I think that’s changing over time. But it will change when it has to, and this is an opportunity for it to choose to change.
The nine members of the monetary policy committee (MPC) are all men, as are the 11 members of the financial policy committee (FPC). Threadneedle Street [a metonym for the Bank of England] has three governors and 10 other executive directors, of whom only one…is a woman. Lady Rice is the only non-male among the dozen members of the Bank’s court of governors […] It is really not good enough that a body with such power, and which relies so heavily on public trust, should be so unrepresentative of the population it is serving.
An October 2012 Reuters article summarizes the challenges of ensuring balanced gender representation in central banks very well. Though no one doubts Carney’s qualifications, the British commentariat entertained at least three female candidates: Kate Barker and DeAnne Julius, both former external members of the BoE’s Monetary Policy Committee (MPC), as well as MEP Sharon Bowles, chairman of the European Parliament’s economic and monetary affairs committee. Bowles, in particular, made an unapologetic case for her own candidacy:
I know more about financial services legislation than anybody else which fits well with the new expanded remit of the Bank of England. I’m not someone [who was] sitting on the monetary policy committee when the bubbles were growing in the boom years and doing nothing to pop them. […] The new Governor has to restore faith in the banking system. What bigger sign of change is there than choosing a woman and an outsider?
But in political terms, Bowles’ pro-European positioning and her role as a Liberal Democrat MEP would have nullified any real consideration from Tory Osborne. Another candidate Kate Barker released a critical policy report in August, attacking the move of macro-prudential oversight away from the government toward the BoE’s Financial Policy Committee. But there is another issue at stake here, beyond assuaging consciences or appeasing critics. As Hare notes, central banks (specifically central bank committees) face a real risk of groupthink. The BoE recently came under fire for its opacity, lack of transparency and an organizational culture that obstructs independent thought. An internal review of the BoE’s liquidity operations noted:
The Bank is a centralised and hierarchical organisation with a large decision-making burden residing with the Governor and senior management. Less senior staff undertake analysis of a wide range of policy options, and are often willing to challenge their superiors. But there appears to be some tendency for them to filter recommendations in such a way as to maximise the likelihood that senior staff will find the recommendation palatable. While this makes it easier for the Governor…to reach conclusions it risks reducing the range of views he sees and…might lead to a less effective overall outcome. (Emphasis mine.)
In an era where the communication strategies of central banks are increasingly scrutinized, central bank transparency and internal dissent are not optional. While it is naive to think that the simple inclusion of more women will usher in more transparent and accountable central banks, it helps no one if central bank committees are composed only of old white men. As former MPC member DeAnne Julius observes:
The evidence is, if you are going to have committee decisions there will be better decisions if they are made by a committee that has a broad range of perspectives and not a committee of clones.
The BoE sweepstakes are now over, but two things remain clear. Central banks would benefit from a more balanced gender composition. Oh, and Canada needs a new central bank governor (governess?).