Why the world needs more female central bankers

Incoming Reserve Bank of Australia Governor Michele Bullock in 2022. Bullock, currently the central bank’s deputy governor, begins her term later this year. (Bloomberg)

European Central Bank President Christine Lagarde, perhaps the world’s most well-known female central banker since Janet Yellen led the Federal Reserve, spoke candidly earlier this year about being surrounded by men her entire career.  Diversity would produce better results, she said.

The central banking world got two new female leaders in the past couple of months who probably share Lagarde’s views. While the appointments are noteworthy, the focus must lie on what they can achieve rather than on their gender.

Before the appointments of Hafize Gaye Erkan in Turkey and Michele Bullock in Australia, only 22 women were leading central banks out of a total of 186, according to the 2023 Gender Balance Index published by the Official Monetary and Financial Institutions Forum (OMFIF) in April. That was just one more than when the GBI was first released in 2014.

Central banking, like the wider world of finance, has a long way to go to reach gender parity. With broader leadership, these institutions of global standing will be better placed to influence policy that can address inequality in the broader society and serve as bellwethers for diversity in the financial sector. By comparison, women hold 25 percent of senior-level positions (full professor or associate professor) and 37 percent of junior-level positions at some of the world’s top universities and business schools,
according to a research study last year in the Proceedings of the National Academy of Sciences.

Different perspectives are important to challenge an evolving environment and provide more tools for success in a complex world, Margarita Delgado, deputy governor of Banco de España, said in a recent podcast. Central banks “must be a mirror for society” and “an example for the financial sector,” she said.

“The presence of female leaders has an important impact, though it will be refreshing when those leaders are celebrated purely for their talents and achievements rather than also for their gender,” said Clive Horwood, managing editor and deputy chief executive officer of OMFIF. 

Central bankers should be held accountable. But any impulse to make the women who are brought in scapegoats while they clean up others’ messes
— in the event of policy missteps — would be an affront and narrow-minded. One would hope that the world has learned from the time when, for example, Australia’s first female prime minister was the target ofmisogynistic taunts, but in the era of social media, we know full well that it hasn’t. The focus should be on how the job is done, not on who does it.

Bullock, who takes up the role in September, is coming in at the end of the rate tightening cycle, but that doesn’t mean her task will be easy. She has to shepherd the RBA through an overhaul following a government-commissioned independent review that was scathing of the central bank’s
internal culture — not to mention a public sensitive to higher mortgage rates and a media that pulled no punches with her predecessor. The RBA
paused in July after raising rates 12 times since May last year, the highest since 2012.

Erkan needs to fix things too, and her challenges are unenviable. She faces a delicate balance between maintaining the trust of global investors and
appeasing a president whose unorthodox monetary policies — he has dismissed previous governors for raising rates too much — have sent the Turkish lira tumbling.

Before the OMFIF's 2023 survey, only Russia, the European Central Bank and Mexico had a female governor among the Group of 20. (Though the Federal Reserve isn’t currently headed by a woman, regional Feds perform well in the GBI.) The index scores central banks, commercial banks, pension funds and sovereign funds based on the ratio of women and men in their senior staff, weighted by seniority. Governors and chief executive officers are given the highest weights.

Gender balance in central banks is headed in the right direction — the global GBI score rose to 33 from 31 in 2022. However, the changes have been mainly driven at the executive and board level rather than governor positions, highlighting the importance of building a pipeline of female senior talent, the OMFIF noted. The pay gap also continues to be an issue.

There is much to be gained from any improvement. The International Monetary Fund released a working paper in May that seeks to delve deeper into the gender patterns at central banks that “can be seen as a benchmark and a norm setter” for the dynamics impacting women. “If central banks are unequal in their structure, and if this lack of diversity is persistent, then the norms and values coming out of those banks may not uphold gender equality in societies,” Mariarosaria Comunale, Petra de Bruxelles, Kalpana Kochhar, Juliette Raskauskas and D. Filiz Unsal said in the paper.

Gender budgeting is gaining traction around the world. New Zealand earlier this year became the latest country to apply a gender lens to its finances as more nations seek to address economic inequalities faced by women, such as gaps in pay and labor markets. It’s not inconceivable that central banks could at some point apply a similar filter to policies.

We need more female central bank governors and must agitate to get them — and call out those institutions that are falling behind. Only in that way will we reach a place where such appointments barely raise an eyebrow and gender stops being an issue.

As the late US Supreme Court Justice Ruth Bader Ginsburg said: “Women belong in all places where decisions are being made. It shouldn’t be that women are the exception.”

Andreea Papuc is a Bloomberg Opinion editor. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg