In the early 19th century, an investor known as the Widow Borski acquired almost half the shares of the Netherlands new central bank to assist a nation strapped by the Napoleonic wars. Two centuries later, women – who control more than $20 trillion (R134 trillion) or about 70 percent of global consumer spending – account for only about a tenth of the voting power on the world’s key interest rates. Past and present female central bankers say this should change.
They argue that greater representation for their gender may provide broader insight into economic behaviour and promote more financial stability. One academic study in 2000 found that women who served on the US Federal Open Market Committee (FOMC) from 1966 to 1996 were among the most “ease-oriented” officials and that increasing female involvement “could have an important effect on policy outcomes”.
If “it’s all men, then you are excluding quite a wide range of opinion”, said DeAnne Julius, a former Bank of England policymaker and now chairman of London-based Chatham House, an international research group. “Women have different social networks, shop in different places. This makes for a more diverse representation of experience and interests.”
Among officials who publicly vote on monetary policy in the Group of 20 (G20) leading economies, only about 10 percent are women. Females head the central banks of Argentina, South Africa, Malaysia, Honduras, Botswana and the Bahamas, and currently form a majority of governors at the US Federal Reserve.
Recent turnover at the European Central Bank (ECB) and Bank of England has left their policies in all-male hands. There also are no women now among the officials who dictate interest rates for Australia, Brazil, Indonesia, India, Mexico and Turkey.
Even though a greater balance may be achieved as more women enter economics and banking, Julius said that governments might need to follow Kenya and Japan by introducing quotas. Kenya’s central bank act mandates that two of its four external committee members be women, bringing their share of the interest rate vote to at least 25 percent. Since 1998 the Bank of Japan has reserved one of its nine policy-board spots for women.
“While I’m not generally in favour of quotas, when things don’t happen naturally a quota can drive change,” Julius said. “It forces policymakers to think about why there aren’t more women being represented.”
The women who drive 70 percent of total consumer spending decide how their families use financial services, insurance and health care, according to a Boston Consulting Group poll of 23 000 women in 22 countries.
“Women are their household’s chief financial officer,” said Michael Silverstein, a Chicago-based senior partner and managing director at BCG and co-author of Women Want More, a 2009 book about the ways companies can capitalise on female consumers. The book estimates that by 2014, women could earn about $18 trillion a year and control as much as $28 trillion of spending.
Fed governor Elizabeth Duke cited surveys in a May 2010 speech that show women account for 80 percent of all consumer expenditure decisions in the US, making 93 percent of food purchases and 65 percent of automotive buys. “Because women engage in more of the family shopping, they are consistently aware of price changes and inflation,” Duke said. “Women running households know just what it takes to make the budget stretch.”
Women might bring other skills to decisions about interest rates, said Anne Sibert, who sits on the board of Iceland’s central bank. Men might be “more risk-loving and overconfident”, she said.
“Men have a more aggressive stance, which is sometimes destructive and can pull things apart,” Sheila M’Mbijjewe, a member of the Central Bank of Kenya’s monetary policy committee, said. “In the financial world, the requirements for stability and predictability cannot be over-emphasised, and women can bring that.”
Her argument is reflected in studies by John Coates, a former derivatives trader at Deutsche Bank. His work suggests that some differences in risk-tasking may be explained by women producing about 10 percent of the testosterone of an average man in his 20s.
Only 2 percent to 3 percent of the traders at the investment banks he studied were women, while about 60 percent of the asset managers, who have more time to analyse the risks they are taking, were female, according to Coates, who is now a senior research fellow in neuroscience and finance at the University of Cambridge in England.
The 2000 academic paper on the Fed’s decision-making process found that in the three decades until 1996, six of the seven women who served on the rate-setting FOMC were among the 13 policymakers most inclined toward lower interest rates.
While the small sample prevented economics professors Henry Chappell of the University of South Carolina and Rob Roy McGregor at the University of North Carolina from making more than speculative conclusions, they said the results suggested that “greater representation of women in the Fed’s monetary policy decision process could have an important effect on policy outcomes”.
Three women sit on the Fed’s 10-member FOMC and on its board, which currently has five members and two vacancies: Duke, who was previously chief operating officer of Virginia-based TowneBank; Sarah Bloom Raskin, the former Maryland commissioner of financial regulation; and vice-chairman Janet Yellen, who chaired the Council of Economic Advisers under former president Bill Clinton and ran the Federal Reserve Bank of San Francisco.
In Argentina, Mercedes Marco del Pont, the former president of state-owned Banco de la Nación Argentina, has headed the central bank since February 2010. Gill Marcus, the past chairwoman of Barclays’ Absa Group, became South Africa’s central bank governor in November 2009.
Outside of the G20, Zeti Akhtar Aziz runs Malaysia’s central bank, Maria Elena Mondragon is the president in Honduras, Wendy Craigg is the chief in the Bahamas and Linah Mohohlo in Botswana.
Emerging markets were “much more concerned about growing our societies”, said Marcus, who remembers turning up for meetings of international counterparts to find she had been placed on the list of officials’ spouses. “Advanced economies are much more established in their ways of doing things.”
Only two women – Gertrude Tumpel-Gugerell and Sirkka Haemaelaeinen – have had any say in the ECB’s rates since the euro began trading in 1999. Men account for 27 of the 31 officials who have voted on monetary policy at the Bank of England since it gained independence in 1997.
Data suggest a similar discrepancy exists in financial services. Research by the London-based Financial News showed in March that less than 5 percent of the most-senior executives at investment banks are female. That creates a “pipeline problem” that might be fixed as more women studied economics and entered banking, said Susan Phillips, 67, a former Fed policymaker who served as dean of the business school at George Washington University in Washington until last year.
“It’s going to change, but it’ll take time,” she said. – Bloomberg