Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, Congresswoman Carolyn Maloney (D-NY), Chairwoman of the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, and Congresswoman Joyce Beatty (D-OH), Chairwoman of the House Financial Services Subcommittee on Diversity and Inclusion, issued the following statements on a new Government Accountability Office (GAO) report entitled, “Federal Home Loan Banks: Steps Have Been Taken to Promote Board Diversity, but Challenges Remain” (GAO-19-252). The report was requested by Waters, Maloney and Beatty in 2018.
“According to the Government Accountability Office, the Federal Home Loan Banks (FHLBs), which support housing and community investment through loans to member Banks, have shown some improvement in the diversity of their boards,” said Chairwoman Waters. “Since 2015, women and minority directors at the boards increased from 18 percent to 23 percent. However, while their boards seem to mirror the diversity of boards of companies in the S&P 500, given their mission, the FHLBs have an obligation to be leaders on diversity. The FHLBs in particular should hold themselves to a higher standard since over two years ago the Federal Housing Finance Agency (FHFA), the FHLBs’ regulator, allowed the Banks to add an additional independent director to expand their diversity, but only seven of the Banks chose to do so. It is particularly concerning that zero FHLB boards have diverse chairs and that only two Banks have women as vice chairs and only one Bank has a racially or ethnically diverse vice chair. As the chair and vice chair positions are especially powerful, the lack of diversity in these positions is especially troubling. The FHLBs can and must do better.”
“The Federal Home Loan Banks have improved the diversity of their boards, but more work remains to be done,” said Chairwoman Maloney. “The GAO report shows that the collection of clear, consistent data on the demographics of the FHLB boards remains a significant obstacle to improving board diversity, and I look forward to working with my colleagues and the Federal Housing Finance Agency to clarify and streamline the disclosure of demographic information for boards of directors. Improving board diversity at the FHLBs is good governance, good business, and good policy, and we must remain vigilant to ensure that the FHLBs continue their push toward greater diversity on their boards.”
“This report proves that diversity needs to be intentional,” said Chairwoman Beatty. “The boards of the Federal Home Loan Banks, like the corporate boards of public companies, still fall far short of adequately representing ALL Americans. Study after study has proven empirically that more diverse boards produce better profitability, less volatility, and more stability. It is time for the Federal Home Loan Banks to recognize this crucial fact in corporate governance. However, recent regulatory actions taken by FHFA, as well as findings resulting from congressional oversight, demonstrates that the needle is starting to move in a positive direction.”
The GAO report found that:
- The Federal Housing Finance Agency (FHFA), the agency that oversees Federal Home Loan Banks, has taken formal and informal steps to encourage board diversity at Federal Home Loan Banks since 2015, such as:
- Requiring Federal Home Loan Banks to add board demographic data to their annual reports;
- Clarifying how banks can conduct outreach to diverse board candidates; and
- Allowing some banks to add an independent director.
- In October 2018, two Federal Home Loan Bank boards had a female vice chair and one Federal Home Loan Bank board had a vice chair who identified as a minority. There were no women or minority chairs identified in 2018.
- Since 2015, women and minority directors at the board level increased from 18 percent (34 directors) in 2015 to 23 percent (44 directors) in October 2018.
- Directors who self-identified as racial and/or ethnic minorities increased from 11 percent (20 directors) in 2015 to 15 percent (30 directors) in 2017.
The GAO recommended that:
- FHFA should work with the Federal Home Loan Banks to review data collection practices for board demographic information.
Federal Home Loan Bank board directors and FHFA staff also noted actions that Federal Home Loan Banks could take to address diversity challenges including:
- Filling interim seats with women and minority candidates which would increase the likelihood of being elected by the member institutions for a following full term.
- Committing at the board level to identify and mentor potential women and minority candidates.
- Searching for women and minority candidates by looking beyond CEOs for board positions and considering other member bank officers, such as chief financial officers or board directors.
To view the full report, click here.