EBA published a benchmarking report on the diversity practices reported by competent authorities to EBA under the Capital Requirements Directive IV (CRD IV). Article 91(11) of CRD IV requires competent authorities to collect information disclosed on the diversity policy, monitor the extent to which these objectives and targets have been achieved in accordance with Article 435(2)(c) of the Capital Requirements Regulation (CRR), and use the collected information to benchmark diversity practices. The results of the benchmarking exercise reveal that, based on data as of September 2018, the overall representation of women in management bodies in their management function improved slightly while their representation in management bodies in their supervisory function improved significantly. However, the representation of women in management bodies is still relatively low and many institutions do not have a gender diverse board.
More diverse management bodies can help improve decision-making regarding strategies and risk-taking by incorporating a broader range of views, opinions, experiences, perceptions, values and backgrounds. All institutions are required to adopt a policy promoting diversity within their management bodies. The issue of diversity is not limited to gender; it also concerns the age, professional and educational background, and geographical provenance of the members of the management body. Despite the legal requirements, a significant proportion of institutions have still not adopted a diversity policy and not all institutions that have adopted a diversity policy promote gender diversity by setting a target for the under-represented gender. EBA calls on institutions and member states to consider additional measures for promoting a more balanced representation of both genders and on competent authorities to ensure institutions’ compliance with the requirement to adopt diversity policies.
The gender representation in institutions’ management bodies continued to differ significantly between member states. EBA analyzed whether there was, in 2018, a correlation between the profitability of a credit institution and the composition of the executive directors within the management body. Credit institutions that have executive directors of both genders seem to have a higher probability of a return on equity at or above the average of 6.42% than credit institutions with executive directors of only one gender. While 54.70% of the credit institutions with more gender-balanced management bodies in their management function have the return on equity at or above 6.42%, only 40.69% of those with executive directors of just one gender reach that return on equity level. EBA also collected data on remuneration for the management body to establish if there is a gender pay gap and found that the remuneration of male members of the management body is higher than that for female members.
Under the relatively recently revised Capital Requirements Directive or CRD5, EBA is mandated to benchmark gender-neutral remuneration practices and will carry out further work in this area. Therefore, EBA has revised and clarified its benchmarking methodology. Since the last exercise, benchmarks regarding employee representatives have been added and, as part of the 2019 exercise, EBA has performed a first benchmarking of the gender pay gap at the level of the management body.
Keywords: Europe, EU, Banking, Benchmarking Exercise, CRR/CRD, Operational Risk, Governance, Remuneration Practices, Disclosures, EBA
Previous ArticleFSI on Policy Options to Address Regulatory Fragmentation in Banking
Next ArticleEBA Launches the 2020 Stress Test for Banks in EU
APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.
ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.