We need to talk about D&I in banking

Alison is a high achiever; multi-lingual, first-class graduate, and in her first finance job when she is coolly invited to a big-client lunch by a senior because... “it would be nice to have a pretty girl there”. The balloon popping, backhanded opportunity would only end up being one of many to follow her next 20-years in banking.

Whether there’s been any progress for women in the banking sector, really depends on whether you ask a woman or not. If the latest findings are anything to go by, there are many women all with discouraging stories to share about the state of gender equality in finance.

The industry has long faced criticism for being dominated by men and lacking diversity –within financial institutions globally, in 2021 women held just 21% of board seats, 19% of C-suite roles, and 5% of CEO positions. And the other, worst kept, secret is that it is rife with sexual harassment and discrimination. Only recently, a UK Treasury Committee investigation found inadequate systems for reporting sexual harassment, describing the City of London as still being an “old boys club".

"The Treasury Committee findings are disappointing but not surprising," says Michelle Last, an employment lawyer with experience advising workplace harassment victims. Last notes that too often, companies fail to properly address allegations, forcing targets to either remain working with perpetrators or leave their jobs, compounding existing diversity issues.

And there are those who see this as an invitation to abuse their power privileges. Tara, a senior analyst, recounts that a head on her floor had a 10-year affair with a junior colleague and faced no consequences despite global heads asking him to stop. "He’s still there of course," she notes matter-of-factly.

Other stories from the financial world echo similar issues with accountability. One senior member of staff accused a male colleague of touching her inappropriately. He faced no disciplinary action. However, she was paid to leave the firm. He was, as it was repeatedly stressed by HR, one of its highest-ranking analysts.  

“I don’t personally recall there ever being a fair outcome from HR for any of them. Anyone who talks about it risks their job,” Tara says of the many issues she witnessed during her career. “It’s a men’s club in the sense that the men are always protected. You just wonder what links some of them have, to make them untouchable.”

Alison acknowledges that every bank is proactively trying to do more female events promoting women. Entry level improvements are being made to encourage more diverse candidates alongside talks and events to promote diversity and women in the industry. There are also stricter rules on nepotism (yes, that intern might still have a parent in banking) and a clamp down on the things you can expense -- pole dancing bars are no longer allowed (and yes, that might also have something to do with financial cuts).

Regardless, any attempt to improve culture at this level is welcomed. The efforts to introduce talks and foster a more inclusive environment is also a path in the right direction, says Alison, but one that misses a step. “Men should be included in these women’s events, “she says, “they shouldn’t exclude or alienate any group.”

Alongside (albeit fewer) instances of nepotism, and discrimination in banking’s hiring practices, general promotion opportunities are less attainable for women and ethnic minorities, or, are given out, somewhat at random, as a box ticking exercise. Hiring individuals to fulfil a quota, not because they were the best person for the job, will also only foster discontent and create other avenues of discrimination. “In that sense no one has a fair shot,” says Alison.

Companies too, that appoint women to top roles but then ignore their complaints around sexual harassment, only appear motivated by statistics. Admittedly, the banking world has good reason to be concerned by the data. Although gender pay gap reporting is now required – which only highlights stagnant gender pay disparities in the industry in particular – ethnicity pay gaps still go unreported by most major banks. It’s unlikely that if they were reported, the results would be positive. A 2021 recent survey of 800 banking employees found 66% of ethnic minority staff faced discrimination due to their background. 28% said this discrimination was hindering their career, while 48% felt they advanced slower than white colleagues.

According to Alison, bringing everyone to the table could help tackle more nuanced discrimination. Despite recent efforts to change the tide on diversity issues within the industry, outdated attitudes and a sense of entitlement persist; like assuming women fill administrative roles, that typically female departments are ineligible for the scale of promotion afforded to those that are predominantly male, or, acting surprised at a woman’s competence; even, noting the colour of their clothing as ‘too feminine’ for a serious environment.

The industry might be one of the toughest, but the financial rewards speak for themselves. According to the Financial Conduct Authority (FCA), employees in the finance sector earn 29% more than the rest of the average UK worker, before bonuses. As such, inclusion is important to financial institutions as a marker of a progressive, meritocratic, and equitable society and one that supports the right to a lucrative career regardless of ethnic and social background or gender.

Research also demonstrates that consumers opt for companies with a proven commitment to Diversity and Inclusion (D&I). Diverse teams with broader perspectives lead to better risk management, innovation, and financial performance. Without enough diversity, groupthink and blind spots can emerge and cause poor decision making. Better D&I in finance can improve capital allocation, address systemic inequality for groups, attract and optimise talent, and foster cultures where all groups feel safe, valued, and included. The industry and broader economy stand to gain tremendously with improved equity and inclusion.

True progress starts with accountability, and the FCA plans to demand it. There may also be a sea-change, on the horizon. Last year Aviva announced it had sacked a number of its male employees for inappropriate behaviour.  Speaking to MPs on a Treasury committee as part of a Sexism in the City inquiry in December 2023, Aviva CEO Amanda Blanc stated that “every individual firm has to be accountable for allegations such as this.”  Blanc cited several “absolutely appalling” accounts of harassment and discrimination from women who wrote to her before the hearing.

The FCA also aims to tackle problems by mandating firms gather and report diversity data while implementing concrete inclusion goals. But effecting change requires more than just policies, warns Last. Real culture shifts must come from the top down, with senior leaders modelling desired behaviours and firmly addressing misconduct.  

Everyone loves a good comeback story – by December 2024, will firms show they took reform seriously? Or will finance remain an "old boys club" for the foreseeable future? Hopefully not. It would, after all, be nice to extend an invite to anyone who’s simply capable of doing the best job.