Host Julia Streets interviews Andrew Bailey, Governor of the Bank of England. This episode, recorded shortly after Inclusion Week, outlines how the Bank of England ensures that diversity and inclusion is embedded in its culture, as well as its commitment to diversity and inclusion, The Bank’s key areas of focus, which includes supporting staff during Covid-1 and the importance of social mobility. As one of the world’s oldest financial institutions, the Governor discusses the progress made, why diversity must remain a high priority, and sets The Bank’s expectations on firms to align and demonstrate similar commitment.
On 20 December 2019, Andrew Bailey was announced as the new Governor of the Bank of England. He began his term on 16 March 2020.
Andrew Bailey served as Chief Executive Officer of the Financial Conduct Authority (FCA) from 1 July 2016 until taking up the role of Governor. As CEO of the FCA, Andrew Bailey was also a member of the Prudential Regulation Committee, the Financial Policy Committee, and the Board of the Financial Conduct Authority.
Andrew previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting.
Previously, Andrew worked at the Bank in a number of areas, most recently as Executive Director for Banking Services and Chief Cashier, as well as Head of the Bank’s Special Resolution Unit (SRU). Previous roles include Governor’s Private Secretary, and Head of the International Economic Analysis Division in Monetary Analysis.
You can follow The Bank of England on Twitter : @bankofengland
Series Nine, Episode Three Transcript
Julia: Hello, my name is Julia Streets, and welcome to DiverCity Podcast, talking about equality, inclusion, and diversity in financial services. On the podcast we seek to shine a light on positive progress, call out areas requiring further focus and offer lots of ideas to help drive change.
Today it is my great pleasure to be joined by Andrew Bailey, Governor of the Bank of England.
In December 2019, Andrew Bailey was announced as the Governor of the Bank of England, and he began his term on the 16th of March 2020. Prior to that for four years, he was CEO of the Financial Conduct Authority until taking up the role of Governor of the Bank of England. As CEO of the FCA, Andrew is also a member of the Prudential Regulation Committee, the Financial Policy Committee, and the Board of the Financial Conduct Authority. He has held many governance positions in his career and in previous tenures, also, worked at the bank in a number of different areas. For example, Executive Director for Banking Services and Chief Cashier, Head of The Bank Special Resolution Unit, and also the Governor’s Private Secretary and Head of The International Economic Analysis Division in monitoring analysis.
Andrew, thank you so much for joining us. It’s been wonderful that you can take the time. This is a busy year for you no doubt. The first thing I do is, I ask all our guests, which seems a little trite in these circumstances, to ask you what you’re particularly focused on for the remainder of this year. I mean, goodness me.
Andrew: Well, where do you start? I’m afraid we do have to begin with COVID. , I started my term as Governor on March 16th, which was, timing is everything, and it wasn’t the best timing because, literally, I would say on that Monday we had, I think it was about a third of the Bank of England staff were in the building, We’d gone down to a rota, to try and keep some distance between groups and staff. By the end of the week, basically that’s gone as well, and so since then I’ve been here in a, nearly not totally, but nearly deserted building, which I have to say has been the strangest experience but yes, in terms of your question, I mean COVID obviously, and the economic consequences of COVID, all the dominating theme.
Julia: We’re recording this shortly after Inclusion Week, I know that we were very keen to hear your views. I know for you the conversation about diversity inclusion really matters, but the Bank of England, of course, is one of the oldest in financial institutions. I’m really fascinated to understand how the Bank of England ensures that their diversity inclusion is really embedded in its culture.
Andrew: It’s a great question because we are having to, like a lot of institutions, do a lot on that front. To be clear, the bankers have been working hard on this sort of front for the last 15/20 years, I would say, but there’s no question that we’ve had to step up what we’re doing, which is absolutely right. I think if COVID is the biggest thing I’ve had on my agenda, and the biggest in a sense unexpected thing for my term as Governor, which started in March, then the second thing I would say, in terms of notable events since the start of my term, is the Black Lives Matter, the whole issue around that, and that has reemphasized to me and to us the importance of this whole agenda. That is the second thing, but it’s also why it matters a lot to us.
Julia: Is there anything sort of notable that you particularly focused on in the context of that and also diversity inclusion as a whole? I’m quite keen to understand not only where your priorities are honed in, but also arguably quite difficult to change?
Andrew: Yes. I mean, I think there’s a number of strands to it for us. I’ve been fascinated also by the growing attention being paid to what I broadly call the the consequences of meritocracy. There’s one or two very interesting books, which I’m currently reading my way through in all the spare time I have on the subject. I think it does play into the diversity debate because I joined the bank in 1985, so I’ve got a fair time here. I’ve always characterised the bank as a quite determinedly meritocratic organisation. It’s been in the DNA. It’s not an organisation, by the way, people come into the Bank of England, who don’t know it, and often say a few things about it. It’s not an institution that is stocked with what I would call senior people drawn from the very privileged classes.
It’s not actually in my view like that at all. It’s also a much younger institution in terms of its staff. Some people have this image that it must be full of very old people. It isn’t actually, at all. So that tells you something about the place. There’s no question that in my time, which is 35 years with a slight small break, we have what I might call changed the bank into a very necessarily technically meritocratic institution. It is full of very smart people. We’re lucky, honestly, recruitment is something that the bank has a very strong reputation. We recruit very strongly, I would say, not just economists, but obviously economics is our core skill.
Over the last 35 years, the institution that I joined doesn’t bear much resemblance to the institution I’m in today. That has, I think, both been a success and it’s been absolutely essential as the role of the bank has grown and changed. Frankly, I think as in many walks of life, the technical demands on doing jobs have changed as well, but the challenge I think, and this is where the diversity challenge comes in, is, if I’m honest with you, I think we went through a period where we, in a sense, we let meritocracy play out, as it were, in a unconstrained fashion, and occasionally we asked ourselves, “Well, why aren’t we seeing progress?”
Gender was a good example of it. The answer was, “Well, it’s already quite difficult because, when you look at the gender mix of people taking economics degrees in Britain today, it’s heavily skewed.” Is it any wonder that the Bank of England has this characteristic? No. In a sense, we’re just a product of the time, as it were, or a product of the age and somewhat, I think left it there. Now because, that’s honestly, that’s the wrong answer. For me, it’s the wrong answer because I think there are two really important principles I work on with this.
One, we are a public service institution. We are undertaking very important public interest functions in the Bank of England. That’s the reason we exist. We do have to bear a sufficient resemblance to the public we serve to do that. It doesn’t have to be arithmetically exact, but it does have to bear a striking and sufficient resemblance to the society and the public we serve. So if you just let it rip, as it were, in terms of meritocracy and you just to say, “Well, we’ll go where we go, as it were, and we won’t try to shape it and develop people, and lots of different markets.” Then you’re not only not guaranteed to get the outcome you want, but you’re probably sure you won’t, actually. That’s one point.
The second point I would say is I try to not make this sound too trite, is I don’t want to work in institutions for people like me. I think everybody should say that really. The better organisation to work in is more diverse. It’s more diverse in, obviously as we know now, all sorts of ways, and again, If you let the really pure narrow meritocratic argument run its way, particularly as I think, quite a lot of the literature that’s currently being written on the subject points that the educational system here, then you don’t get there, in all honesty.
You have to do a lot more work to manage to influence what you want, and to develop the people you get as well. I think probably we’re not alone in this by any means, but I think that’s in many ways, if I stand back from the day-to-day side of it, that’s some of the big underlying issues in terms of what we have to do.
Julia: I think it very much chimes with a lot of senior executives. I was explaining before we started recording. I’ve just literally come hot from Sibos , which is a main stage event talking about the importance of diversity and inclusion. A lot of institutions are thinking about, we have to be very proactive, we had to be very focused on practical things that we can do in order to change the mix because of the reality. I’m really interested in perhaps, whether you could share some of the practical things that the bank has been doing, maybe the last year.
Let’s look at a year as the timeframe, and just if there are some very specific things, obviously in an extraordinary year as well, in order to drive the change that you were just talking about.
Andrew: I’ve been out of the bank for three or four years. I’ve come back to actually, and I’ve been very impressed in many ways by what I’ve come back to. I think the bank has made a load of progress in terms of developing its networks of staff, of changing its recruitment patterns, but we’ve still got work to do. I’d highlight a number of things. First of all, we have to confront the fact that when we look at the data, the record on performance isn’t frankly as where it needs to be. When we look at how different groups of staff develop, who gets promoted, when, and that speed of promotion, speed of development, how that translates into a reward, it’s not where we want it to be in terms of the balance.
I think this is a crucial thing because, again, it comes to the culture of the institution. In my view, it’s not a bad culture at all. I think there’s a danger with any organisation that when you get that evidence, and you look at it, and then you have this obvious loss of confidence because at this point, you say, “Why aren’t we dealing with this? What’s the issue?” I think you can then often get a first reaction, which is, “Well, no, no. We’ve gone back and we’ve looked at the evidence, looked at case studies, and we’re applying the test.” Nobody’s making the wrong choice. Nobody’s making a biased choice. It comes back to the meritocracy point, but I think if you leave the whole debate there, and you say, “Oh, okay, fine. Well, that’s good.”
“We can stand our decisions up.” If you leave the issue at that point, I think you’re missing the issue because the next question I think you have to ask yourself, if you are in that situation, I think the next question you have to ask yourself is, “Well, why is this happening?” It’s not good enough to say, “Oh, okay, well, that’s good. We’ve got a story. We can stand our decisions up, as it were.” You have to go further and say, “Why are we getting these outcomes? And what do we do about it?” I think in terms of what’s changed and what’s changing is a much greater determination, and I’m very, very strongly behind this, to go to that next stage and say, “We can’t just accept the logic of our decisions within our own terms of reference.”
“We have to go to what the underpinning causes, and start to address those.” Is it things about our way of working? Are we working in ways that have effects in that sense? That’s a bit of a leading question, really, because the answer is yes. Are we lacking role models? I think role models are important, I really do. I think that unless, people, particularly more junior people can say, “I can observe looking at the management that people like me get on in this place,” and I think if they answer the question, “Well, no. I can’t observe people like me merely by observation. I can’t observe that people like me are getting on at this place.” It doesn’t seem to me surprising that people conclude that that’s discouraging, and question where they are.
Julia: This very, very much chimes with what organisations are being very, very precise about, is thinking about culture. It’s fascinating we’ve had the great pleasure of interviewing the FCA, and they said, “We look at culture under non-financial conduct,” because, actually you might say you have to be paying attention to culture, particularly; role models and networks, absolutely. We, quite often in diversity inclusion, we naturally tend to hone in on the conversation about gender. Obviously, we’re thinking very broadly a right way across the entire spectrum that is diversity and inclusion, and that extends to disability, LGBT+, also thinking about ethnic minority representation, and social mobility as well, I think is really fascinating.
Can you give us just a few insights into what the Bank of England is thinking about in ensuring that the diversity inclusion efforts also extend to support those groups as well?
Andrew: You mean inside of the Bank of England in our role as a regulator as well?
Julia: I guess it’s a two-part question. So one is, “What are you doing yourselves?” And then, also expectations.
Andrew: I’ve run both those regulatory sides. I was the CEO of FCA until earlier this year. I think both the Bank of England as a prudential regulator and as a conduct regulator, and we will tell you the same thing, which is, culture does matter. I can tell you having gone through the financial crisis and been a regulator for the last decade and senior levels, I think pretty uniformly regulators will say to you, “When we come across firms that are frankly the wrong side of our line, whether that be conduct or prudential, more often than not, there is a cultural issue there. It doesn’t often happen randomly. I think, particularly with conduct, but it’s also true with prudential as well, actually.
I think history will tell you, the link might be slightly less obvious, but it’s true. There is usually a cultural issue. There’s usually a problem in the culture. It may be to do with behaviour of management. It may be something more deep-seated in terms of culture in the organisation. That explains why, I think, when you talk to regulators these days, they will tell you that it does feature quite heavily. Governance and culture, which are often also not unrelated, feature very strongly when they come to do the diagnosis, if you like, of the firm and the diagnosis of what they’re seeing in terms of the headline outcomes, and their agenda.
It is important, and one of the advantages of being a regulator is that because you see the whole peer group of firms, you can make these comparisons. You can sit down as a regulator and say, “Let’s compare X, Y, and Z,” because we see them all, and I’ve had some fascinating conversations about that, but it’s also right because you’d get a better ability to judge because you can do the peer assessments.
Julia: To what extent is your conversation with those firms extending into, “This is what we’ve observed, and we encourage you to pay attention to culture, your diversity and inclusion efforts?” Is it fair to say that, that conversation is shifting?
Andrew: Yes. I think we have. I think it has changed. I think we do regularly, and particularly the FCA with conduct, would say to a firm, “We believe, from what we observe, you can trace this outcome, which is unwanted. This outcome that we’re most concerned about, you can trace it back to causal issues,” of which, broadly define culture as often optimal, I think. So yes we do that, actually. We have also, and again, I think it’s been a development of recent years, put our own effort into saying more broadly developing diversity. The agenda of diversity is important. I think more diverse firms are linked to culture, therefore, it’s linked to outcomes, which regulators care about.
Julia: I think that’s a perfect moment to turn to Cynthia Akinsanya for some research to support today’s discussion.
Cynthia: The Bank of England values diversity and inclusion for many reasons. One way they support their diverse workforce is through their networks. These include the LGBT and Alleys Network which is a participant in the workplace equalities index. The Disability Network supports individuals with specific employment issues and raises awareness of disabilities and the challenges people face.
The Bank of England Ethnic Minorities Network, also known as BEEM, ensures BAME staff experience the same performance reviews, rates of pay and development opportunities as non BAME colleagues. BEEM is committed to addressing the imbalance of BAME representation at a senior management level.
The Carers Network provides information, advise and support colleagues need to balance caring responsibilities with a successful career. The bank also runs The Christian Union, The Jewish Network and The Muslim Network.
Julia: Thanks, Cynthia. The links to the research can be found on our website, divercitypodcast.com. That’s where you can find all our episodes and sign up for early notifications of future recordings. Please do follow us on Twitter @divercitypod, and DiverCity Podcast is available on BrightTALK and all good podcast channels. We’d love a rating because it all helps to promote the show.
Andrew: When I look at the Bank of England, in many ways, I’d say the same thing of the FCA as well, actually. I think increasingly and correctly, I ask myself the question, we appear to have made more progress in some areas than others. I think relatively, we’ve made more progress on gender than quite a few of those, and then you have to ask the question why?. Again, now I think one explanation for that is that I think we started out to go back through the history of this. I think most organisations like ours took up gender earlier than some of the other aspects of diversity.
I think it’s in one sense, not surprising. By the way, I should say, to be clear, we are not in any sense where we need to be. We’ve still got work to do and progress to make, don’t get me wrong. I’m not saying that because I know the standard only sounds complacent, but I think we have made more progress in terms of role models, and gender, but we’re not where we need to be. Although, we can at least tell a story about we’re getting there, I think, but we have a lot more progress to do in other areas, I would say. I think also we’re still extending the work as well.
I think social mobility is an important aspect of this. The FCA really took on social mobility, and really in the last few years. Chris Woolard, who is one of my senior colleagues, really sort of in a sense championed the FCA, and I thought it was a very good thing to do, because I think it leans against any sort of sense that it’s the same concept of meritocracy leads you to a particular concentration. You’re looking in the wrong direction sometimes. I have to say, though, on the question of ethnicity, we have made less progress.
That is why I think, in many ways, the whole issue around Black Lives Matter is important because it supports its own rights, but it’s important because it is, I think, a kick up the backside, if you like to say, “You’ve got a lot more to do on that front. You’ve made relatively more progress in some other areas.” I think the infrastructure broadly defined in some areas is better developed than others. I’ll give you an anecdote actually from the FCA, but it’s true for the Bank of England as well. We’re quite competitive actually, in terms, for those areas where there’s sort of this external measurement, we’re quite competitive, as probably all organisations are.
Julia: That doesn’t sound like the City at all!
Andrew: Absolutely not! We were quietly encouraged by our progress, in terms of our ranking in the Stonewall Index, and then one year, this is about two or three years ago, we went down and we were a bit shocked about this because we thought we were doing rather well. In fact, we thought “hang on a minute”. We’ve really sort of tried hard this year, well, tried hard this year, actually, and we’ve gone down, and what we concluded and realised was that, of course, actually of course others were trying even harder, which is great. I mean, but in a way, and I said, “Well, that’s a good thing really.” So we thought, “We’ve got to try even harder. It spurred us on. As you say, the trouble with The City is it’d be sort of sad if we reduced everything down to a competition.
Julia: But that’s why metrics matter. Isn’t it? That’s exactly why.
Andrew: It does work. If you had asked me 15 years ago, I’d have been, to be honest with you, a bit of a sceptic about targets because does it really induce the right behaviours, but I got to a point, I’m trying to think now, 10/12 years ago where I realised that we were just not making enough progress, and it was all good intentions and words, and not actions, and that we had to start taking a more determined view and that actually targets, providing you manage them correctly, can help in that respect, and they have, I think. I think that side of things has moved forward, but we’ve got a long way to go. I mean, we’ve got a lot more to do. Honestly, we’ve got more to do, relatively more to do in some areas than others, I would say.
Julia: Just one final question before we wrap up, which is a question I’m asking everybody, actually. It didn’t matter where they are from in the world of financial services, and also around the world as well, because we have this is in more than 50 different countries as well, which is, We are all going into some tough economic times. There’s no question about that at all, and there is a risk. There’s a massive risk that actually the conversation about diversity and inclusion can drop down the corporate agenda. So my question to everybody is why is it so important right now that diversity inclusion remains high?
Andrew: I think it’s important because we’re going through some obviously a very strange and difficult time in terms of how institutions operate. By the way, I think the backend of many institutions has adapted remarkably well to it, but in going through this big adaptation, it’s important that we don’t lose the objectives and progress that we want to have on diversity, and we have to try harder. We’ve done a lot of work in the bank, for instance, developing our internal blogs. So staff, they can’t actually talk to each other in the way they used to. They’ve got more opportunities and that’s actually coming on very well, actually, I would say. People are generally very pleased with it.
To be honest with you, there’s many alarming things about COVID, but one of the things that alarmed me about COVID particularly if you go back to the spring, was how we should interpret the evidence that the death rates were skewed, in terms of diverse characteristics. I do a weekly video for our staff because, obviously, I don’t see them that much, and I did a video saying that one of the things that we’re going to have to be very, very concerned about and work our way around is where we say, one group of staff can come back to work because they have certain characteristics, but it’s too risky for another group to come back, who then get marginalised. I mean, that’s a disaster.
I think the evidence on COVID has probably moved on since then, back in the spring, I was very worried about it because I thought, “This is going to be a disaster for us. If, we start applying and applying it for good reason. I mean the first priority is we don’t put our staff in danger, but if the consequences of that priority is that we effectively apply or we reach an outcome where some groups can come back to work and some can’t, that’s an absolute disaster. It hasn’t really played out like that in the end, but I mean, that’s the thing I think you have to be very concerned about for society at the moment.
Julia: That in my mind, while you’re talking, I’m thinking, “That’s about an enlightened leadership who really understand their organisation and their people, and their familial circumstances and their personal circumstances, and also understanding the future of the workplace and thinking about, how people are going to come back, to whichever model they adopt or indeed to which they adapt.”
Andrew: I agree, and I think there are other aspects of COVID. I think there’s obviously a very important mental health aspect. Again, I’m very pleased with the way the Bank of England is now a much more open organisation in terms of tackling and enabling people to, in a sense, tackle mental health issues because that’s important. We are putting strain on others, a lot of strain, I think, in the current environment, and we have to be very cognizant of these issues as we go forwards. I mean, there’s also an issue, obviously that, some people are more able to work from home than others. Again, in society that matters a lot, but you see it at the Bank of England, but you see it much more broader in society. There will be effects, and we have to be very alert to those effects, and the consequences that could follow from them.
Julia: I have one final question for you. What are you optimistic about?
Andrew: Well, I’m optimistic that I think, certainly we are moving on in the world with it. One of the challenges I get from the staff is, “Is it all talk and no action?” Because, like many institutions, we’re quite good at talking, and I do see the evidence. I am optimistic in the sense that I do see the evidence that we are moving on, and that we are more action oriented. Honestly, I think our staff would tell you, we have to really prove that. We’ve got to actually prove that we’re now focused on action, but I do see a very broad commitment across the organisation to do that, and that does encourage me. This is not a point of resistance, actually.
I’m also encouraged by messages I get from colleagues who say, “I wish we’d got to this point years ago.” I never said it, but I wish I had.
Julia: I think that’s a very poignant way to end the conversation. Andrew, I can’t even begin to imagine how busy you are, but to have taken the time to speak to us today, immensely grateful, and thank you and stay well, and for your time we’re grateful.
Andrew: Well, thanks. You, too. Thanks so much. It’s been a fascinating conversation.
Julia: A pleasure. Thank you very much, and as always to all our listeners of DiverCity Podcast, thank you for tuning in. I’ve been Julia Streets. Thank you.
Kieron: This episode of the DiverCity Podcast was produced by me, Kieron Yates, on behalf of Julia Streets Productions. Thanks to Cynthia Akinsanya for her insights. You can find out more about the guests on this week’s show on our website, divercitypodcast.com. Whilst you are there, you can also sign up to our newsletter for all our latest updates.
To be sure of catching all our future podcasts, subscribe to our feed on iTunes, or your favourite podcast app. And, if you’ve enjoyed this episode of DiverCity Podcast, remember to give us a rating or review. This all helps promote the show to a wider audience. Finally, our Twitter handle is @divercitypod. Thanks for listening.