Diversity and Inclusion: why it matters for the Central Bank - Vasileios Madouros, Director of Financial Stability

04 September 2019 Speech

Vasileios Madouros

Speech at National Diversity & Inclusion Conference1

I am delighted to be here today and to have the opportunity to talk about diversity and inclusion from the Central Bank’s perspective.
It is very fitting that – in a conference about diversity and inclusion – this is a panel consisting of two very different organisations.
Google is part of a wave of companies driving innovation and change at a global level.  It was founded just 20 years ago, by two PhD students at university. “You can be serious without a suit” is one of Google’s “10 things we know to be true”.2
The Central Bank of Ireland belongs to a family of institutions that are more likely to be associated with conservatism and tradition. The oldest central bank in the world was founded in 1668. We are public sector organisations. And some have described what central banks do as “taking away the punch bowl, just as the party is really warming up”.3
On the face of it, then, we are very different.  But, if you look deeper, you will also find similarities, not least in the recognition that embracing diversity and inclusion is crucial for the success of our organisations.
So today I want to focus on the journey that the Central Bank has been on in terms of diversity and inclusion, both from the perspective of our own organisation and culture, but also as a driver for change in the broader financial system. 
The Central Bank’s mission is to serve the public good. 
We do this by keeping inflation low and stable; by making sure that the financial system is resilient to shocks; and by ensuring that the financial system operates in the best interest of consumers.
So, we are a public institution, with a very specific mandate, operating in a specialised field.
Many of us working in the Central Bank tend to be, or eventually become, experts in the fields of economics, finance or regulation.
So why does diversity matter for us?
First, because diverse organisations are better equipped to tackle complex problems. 
And there is no shortage of complex problems in the Central Bank.
The functioning of the economy and the financial system depends on the behaviour of large numbers of consumers and businesses.  The factors that influence that behaviour vary, both across different groups and over time.  And the behaviour of one group can affect the wellbeing of others.
In a nutshell, the economy and the financial sector are prime examples of complex systems.
In this context, the evidence on the benefits of diversity – from a range of fields – is clear.4
The basis for better outcomes – especially in the face of particularly complex problems – is cognitive diversity. 
That is differences in how people think, how they perceive information, how they analyse it.
Cognitive diversity makes teams less susceptible to blind spots, biases and groupthink. 
As a result, diverse teams are better able to innovate, solve problems and make predictions.
In turn, cognitive diversity is influenced by identity diversity. 
That includes differences in gender, ethnic background, sexual orientation, education, age or ability. 
These dimensions of our identity influence our experiences and – in turn – shape our perspectives and our ways of thinking. 
So, from the Central Bank’s perspective, a diverse team is likely to be better able to understand the economy and financial system and, so, develop better policies to serve the public good.
Indeed, a lack of cognitive diversity was one of the factors contributing to the global financial crisis. 5

In the period before the crisis, there was a widely held view among market participants and regulators that the global economy had become permanently more stable and that modern finance had become so sophisticated that it could self-correct.6

Groupthink had prevailed.  The costs of that groupthink on society became painfully clear during the crisis.

So, to be able to deliver on our mandate, cognitive diversity, in turn influenced by identity diversity, is key. 

The second reason why diversity matters for the Central Bank is because we are more likely to be effective if we represent the people that we serve.

Why is that? 

Representing those that we serve increases the likelihood we will engage effectively with the public. 

Listening to the public helps us understand the issues facing consumers and businesses. This, in turn, helps us design better policies.

Explaining what we do – and in a way that people actually understand – helps strengthen the effectiveness of our policies.  And it allows others to hold us to account.

So engaging with the public is important for the Central Bank.

And we are more likely to do this better, if we genuinely represent the population that we serve.

That’s similar to experiences in other industries. 

There’s plenty of evidence that companies are more likely to design better products if those that are involved in the design phase reflect the diversity of the company’s customer base.7

Representing those that we serve also increases the likelihood that we are trusted by the public. 

The Central Bank’s work often requires developing deep technical expertise. 

But we will not be effective in delivering our mandate if we are not trusted by the people we serve.

So how can the public trust us – the technocrats?

In part, I would hope, through the visible impact of our policies and by operating in an open, transparent and accountable manner.

But familiarity also helps.8 Reflecting the diversity of the people that we serve can help build trust. 

It can reduce misperceptions that central bankers are experts, sitting in their ivory towers, making decisions for someone else’s benefit.9

In summary, diversity matters for central banks.  So what are we doing about it?

 We are on a journey ourselves.

Just a decade ago, diversity and inclusion would not have been at the top of our agenda.

But this is now a strategic priority for the Central Bank. 

We are taking a long-term approach, by embedding diversity and inclusion into key people practices, including recruitment, leadership development and our broader ways of working.

We have several employee networks that help to bring diversity and inclusion to life at the Central Bank – identifying and addressing issues that matter from the perspective of the individuals themselves. 

And we’re actively measuring and monitoring progress, holding ourselves to account.  For example, we have been publishing our own Gender Pay Gap Report on our website, ahead of relevant legislation.10   And we are seeking to expand the data we collect on diversity. 

There is evidence that we are making progress in some areas. 

Today, for example, women make up almost 50 per cent of our total workforce, 40 per cent of our senior leadership team and one third of our board.

This is a transformation relative to where we were 10 or 15 years ago.

Our gender pay gap stood at 2.4 per cent in favour of men at 1 January 2019.  This is significantly below the national and European averages of 13.9 and 16.3 per cent respectively.11

In our annual survey of Central Bank staff, the scores around diversity and inclusion are amongst the highest across the different categories of questions – though there’s still plenty of scope for improvement.

So we’ve made progress.  But we recognise that we not there yet.  Which is why we are determined to maintain our focus on diversity and inclusion as an organisation into the future.


 Now let me move on to diversity in the broader financial system.

Many of the arguments I have just made apply to financial services firms.

Financial services is a complex business.

To thrive in that environment, and ensure that the financial system operates in the best interests of society, financial services firms need to be able to draw from a range of perspectives, competencies, insights and experiences.

You don’t just want optimists, big picture thinkers or people who rely entirely on logic. 

You also need a hint of pessimism; those that pay attention to detail and those that are better at engaging on an emotional level.

You want individuals with different perceptions of risk and those that are willing to articulate dissent at crucial times.

In our judgement, the financial services industry has further to go to address issues around diversity and inclusion in a meaningful way.12  

Let me just give you one example that illustrates that.  The firms that we regulate need to get the Central Bank’s approval before appointing individuals to certain senior roles.

In 2018, women accounted for only around 1 in 4 of the applications for approval that the Central Bank received.13  This was an improvement from previous years – when women accounted for around 1 in 5 of those applications for approvals.  But it’s still a striking statistic.

The good news is that, from a regulatory perspective, diversity is supervisable.  And that is exactly what we are doing.

We expect regulated financial institutions to meaningfully address diversity and inclusion in the boardroom, at the executive level and in the pipeline of talent needed to run the organisation in the long-term.14

We review the policies that are put in place to achieve this.

And we analyse data on outcomes, both for individuals firms and the sector as a whole. 

So we take diversity and inclusion within the financial services industry very seriously and it is something that we will continue to focus on in our role as supervisors.

Because, at the end of the day, it is likely to lead to a financial system that is safer and better able to serve consumers and businesses, both in good times and in bad.


The potential benefits of diversity are broadly understood. 

But a key challenge for all of us is how to realise these benefits.

Diversity, in and of itself, will not automatically translate into the results we would all want and expect.

Different perspectives need to have a voice; and that voice needs to be heard.

That is the inclusion part of the equation.  And that requires cultural change.

Fostering an environment where the impact of ‘difference’ is not just understood, but also celebrated and captured.

And that – I think – is harder to achieve, for a number of reasons.

  • Achieving cultural change tends to be complex and long-term in nature. Other nearer term issues may be seen to be more of a priority.
  • Measuring inclusion is hard, so gathering the evidence to assess progress or analyse the impact of inclusion on performance is not straightforward.
  • Behavioural change may be uncomfortable for some individuals.
  • And, when we are under pressure or facing uncertainty, it is often easier and quicker to make decisions using the unconscious part of our brains.

In the face of these constraints, what can we do to foster an inclusive culture?

It will come as no surprise that I don’t have a silver bullet – I doubt there is one.  I’m still learning and trying different things myself – indeed, I hope to get more ideas from today’s conference. But – on a personal level – there’s a few areas that I’m focusing on and trying to do more of.

  • First, be more vocal:  It’s important to continuously emphasize the benefits that different perspectives and constructive challenge bring to our organisation.  I sometimes fall into the trap of assuming that – having expressed my passion for diversity and inclusion a few times – it will be enough. It’s not. It’s easy to forget the power of communication to influence culture.
  • Second, ask more questions – and in different ways: People need to know that their opinion is valued – and there’s no better way than asking.  But I’ve found that it’s also about asking in the right way.  Some people may not feel comfortable speaking up in a big room.  Others may not feel comfortable expressing a contrarian view.  Trialling different approaches to hearing what people have to say is something I’m working on.
  • Third, understand the unintended consequences of my own actions and self-regulate:  We all have micro-behaviours that can have a disproportionate impact that we don’t expect. For example, on a personal level, I sometimes find myself eager to ‘get stuff over the line’.  This can at times blind sight me and not always allow for sufficient discussion.  Being aware of such behaviours is a starting point – the harder bit is adjusting my own behaviour.
  • Fourth, recognise the limitations of the lens through which I perceive the world: I am very conscious that my own experiences will shape how I perceive things. I don’t fully understand the perspective of, say, a single parent or someone who is differently able.  One of my favourite initiatives in this area are reciprocal mentoring schemes.  Because the reality is that a mentor often has as much to learn as the mentee, especially if they are from different backgrounds. Understanding what could shift the dial at work from the perspective of a mentee can help the mentor make a difference.

I want to finish off with a few words on what’s driving me personally.

The evidence on the business benefits is convincing.  To me, it’s clear that continued progress on diversity and inclusion will enable us to achieve the Central Bank’s mission and contribute to a safer financial system, which serves society better. 

But that’s only part of the equation. For me, a key driver is the fact that there is still too much evidence in our societies that certain groups of people are systematically disadvantaged.

On one level, you may think that, as individuals, our own actions can only have a very limited impact in remedying that. 

But there’s another way to think about this.  People spend a big part of their lives at work.  And the opportunities they have at work have a much bigger and broader impact on their lives.

So through fostering a more diverse and inclusive environment at work, we have the opportunity not just to deliver better business outcomes, but also to have an outsized impact on society. 

Thank you for your attention.


[1] I am particularly grateful to Susan Eaton and Antoinette McDermott for their insights and help with preparing these remarks and to a number of colleagues at the Central Bank for their helpful comments and suggestions.

[2] ‘10 things we know to be true’ by Google, available at https://www.google.com/about/philosophy.html.

[3] Martin (1955) ‘Address before the New York Group of the Investment Bankers Association of America’, available at https://fraser.stlouisfed.org/title/448/item/7800.

[4] For a comprehensive review of both the theory and evidence see Page (2017) ‘The Diversity Bonus’, Princeton University Press

[5] For example, the Nyberg Report identified groupthink as a key contributing factor to the financial crisis in Ireland (Nyberg Report, Misjudging Risk: Causes of the Systemic Banking Crisis in Ireland).

[6]See, for example, Padoa-Schioppa (2010) ‘Markets and government before, during and after the 2007-20xx crisis’ and Kohn (2018) ‘From the great moderation to the great recession and beyond — how did we get here and what lessons have we learned?’.

[7] See, for example, Bhawalkar (2019), ‘The Inclusive Design Imperative: Win And Retain More Customers’ and Perez (2019) ‘Invisible Women: Exposing Data Bias in a World Designed for Men’.

[8] Farmer et al (2013) ‘Trust in Me: Trustworthy Others Are Seen as More Physically Similar to the Self’, Psychological Science

[9] Carney (2017): ‘Reflecting Diversity, Choosing Inclusion’, available at: https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/reflecting-diversity-choosing-the-inclusion.

[10] The latest report is available at: https://www.centralbank.ie/docs/default-source/careers/policies/gender-pay-gap-report-2019.pdf.

[11] Central Bank of Ireland (2019) ‘Gender Pay Gap Report 2019’, available at: https://www.centralbank.ie/docs/default-source/careers/policies/gender-pay-gap-report-2019.pdf.

[12] See Rowland and Sibley (2018) ‘Lack of diversity is part of the problem with our banking culture’, available at: https://www.irishtimes.com/opinion/lack-of-diversity-is-part-of-the-problem-with-our-banking-culture-1.3675900

[13] Central Bank of Ireland (2018) ‘Demographic analysis – Applications for Pre-Approval Controlled Functions (PCF) roles in regulated firms – 2018’, available at: https://www.centralbank.ie/docs/default-source/publications/demographic-reports/2018-demographics-of-the-financial-sector-report.pdf.

[14] For example, for the five Irish retail banks, we have clearly set out expectations as part of our Behaviour and Culture review. See Central Bank of Ireland (2018) ‘Behaviour and Culture of Irish Retail Banks’, available at: https://www.centralbank.ie/docs/default-source/publications/corporate-reports/behaviour-and-culture-of-the-irish-retail-banks.pdf?sfvrsn=2.