Are financial services boards keeping up with the changing landscape?

The EY European Financial Services Boardroom Monitor provides up-to-date insight, data and analysis across Europe's major financial boards.

Questions to ask

• Are financial firms equipping their boards with the skills, vision and experience needed to understand and drive the right response in an everchanging market?
• How do financial services boards weigh up in terms of both “traditional” experience and when it comes to newer focus areas?
• Do financial services boards have a level of diversity and experience across sustainability and tech that investors find attractive?

As market, economic and geopolitical crises converged this year, European financial services firms have faced continued tests. Surging energy prices, broader inflationary pressures and prevailing uncertainty all threaten the economic stability of the region and pose challenges for Europe’s financial ecosystem.

After more than a decade of regulatory reform, followed by a global pandemic that simultaneously disrupted and accelerated major structural change, war in Ukraine, rising inflation and an increasingly tight labor market, the world’s major financial centers are readying once more for recession.

These macro headwinds challenge the timelines for firms’ collective progress towards climate commitments and could delay the technological revolution underway across the sector. This is a moment at which shareholders’ expectations of leaders across the industry are ramping up and the experience, guidance and skills in the boardroom are being put to the test.

EY research (pdf) highlights the rapid shifts in the risk outlook for European banks and the changing nature of the priorities for management and boards of directors. Credit concerns and cybersecurity risks remain front of mind across the continent, but climate change and environmental concerns are now also regarded as a top risk, according to over half of Chief Risk Officers surveyed1. This story echoes across the insurance and wealth and asset management sectors.

Year-on-year, financial services firms are increasing strategic investment in their digital transition, innovation and sustainable finance credentials, but are firms equipping their boards with the right skills, vision and experience to keep pace with these changes? Do boards have the depth of expertise required to understand and drive the right response to climate change or technological innovation?

We launched the EY European Financial Services Boardroom Monitor (EY Boardroom Monitor) to help answer these questions by charting the experience, training and skillsets of board directors across nearly 100 major European financial firms and some of the largest non-European firms with significant operations in Europe.

The EY Boardroom Monitor assesses the skills and diversity (gender and age) across European financial services boardrooms, and analyzes the expertise delivered through board composition relative to the emerging challenges. The EY Boardroom Monitor will track changes in board composition over the coming years, but for now, let’s focus on what the first data cut revealed.

Board demographics – does size tell us anything?

The size of financial services boards varies considerably. While the median number of board members at firms assessed by the EY Boardroom Monitor is 12, across the dataset, the size of the board doesn’t necessarily correlate with the size of the institution. For the largest 20 firms (10 banks, six insurers and four wealth and asset managers), the size of the board ranges between eight and 23, with a median of 14.

Gender and age diversity – how is the financial industry doing?

The EY Boardroom Monitor gives us insight into the progress financial services boards have made towards gender parity. It shows that women make up, on average, across Europe, 40% of financial boards. Yet while the sector has come a long way, the rising tide has not lifted all boats. Only one in four firms monitored have at least an equal number of seats held by women, evidence that progress is still far from uniform. Overall, the percentage of women on the board ranges from 11% all the way up to 60%. In light of recent regulatory interventions, and amid increasing pressure from investors for boardroom gender parity, progress here is expected to accelerate in the near-term.

There is currently little age diversity on financial services boards. Across the more than 1,000 board members at almost 100 firms, just 10 are under 40. The youngest director is currently 30 and the oldest 88, although the vast majority sit between 55 and 65 years old. In a world in which financial companies strive to keep up with rapid digitalization, the question of whether younger voices bring valuable and different insights to the table, and if they are sufficiently represented, arises. It is often countered by arguments of experience trumping youth.

Our data shows a correlation between the total number of seats on a board and age disparity, suggesting the larger the board, the greater the opportunity to ensure different generations’ views are reflected. This could benefit both employees and companies alike and would mean that broadening the age spectrum doesn’t have to affect overall experience.