Credit Union, Community Bank Regulators Trail Peers on Diversity

The National Credit Union Administration and Federal Deposit Insurance Corp. have the least diverse workforces among federal financial regulators, making only marginal gains over the past several years.

Minorities made up less than a third of NCUA or FDIC staff in 2019, according to the agencies’ most recent diversity statistics. About 39% of the employees at other financial regulators on average identified as Black, Hispanic, Asian, Native American, or multiracial last year, a Bloomberg Law review of agency data showed.

Diversity at financial regulators has a direct impact on minorities, which make up about 40% of the U.S. population. However, minorities disproportionately struggle for fair access to the financial system and are more likely to feel the negative impacts of economic downturns such as the 2008 housing crisis and the coronavirus pandemic.

“The time has come for financial regulatory agencies to more accurately reflect the demographic diversity of America,” said House Financial Service Committee Chairman Maxine Waters (D-Calif.), who helped write Dodd-Frank Act provisions requiring financial regulatory agencies to report their diversity efforts.

NCUA Chairman Rodney Hood, who last year became the first Black leader of a federal banking agency, said increased diversity is a top priority at his agency and the roughly 5,200 credit unions it oversees.

“This agency has long been a leader on issues of diversity and inclusion, and we must face up to the reality that we still have much work to do internally here at the NCUA,” Hood said in a statement to Bloomberg Law.

Assessing Diversity

Bloomberg Law reviewed diversity statistics in annual reports from the Consumer Financial Protection Bureau, Federal Reserve System, Securities and Exchange Commission, and Office of the Comptroller of the Currency, as well as the NCUA and FDIC.

Each agency has unique supervisory powers over the financial services sector, with different hiring authorities, workforce geographic dispersal, and other factors that play into its diversity numbers, according to the agencies’ reports. At NCUA and FDIC in particular, diversity is important because Congress has directed the regulators to promote and preserve minority depository institutions.

The reports were published by the agencies’ Offices of Minority and Women Inclusion, which Waters helped create under Section 342 of the Dodd-Frank Act, which strengthened financial regulations in 2010 in reaction to the 2008 financial crisis.

Diversity at the senior level of agencies has the greatest impact on capital formation and allocation, financial regulation, and consumer protection issues vital to communities of color, according to Georgetown Law professor Christopher Brummer. He conducted a recent study that found only 10 Blacks, out of 327 people, have been confirmed to senior leadership posts at financial regulators since the 1930s.

“The absence of African American financial regulators poses enormous challenges from the standpoint of participatory democracy, and economic inclusion,” he wrote.

Waters agreed: “The policies created at financial regulatory agencies affect people of color greatly, but much of the time they are shut out from the leadership roles and the decision-making process at every level,” she said.

Leadership Impact

The percentage of minorities at both the NCUA and FDIC was about 30% in 2019, a growth of only about three percentage points since 2012. While the lower percentage of minorities at the NCUA and the FDIC predates the tenures of the current Republican chairs, both financial regulators said they have made strides in minority representation in their workforces in some areas.

Minorities constituted about 15% of the NCUA’s senior staff in 2012, and now make up 25% of the ranks, for example.

Minorities made up 16.7% of the FDIC’s executive manager ranks at the end of 2019. That percentage has fluctuated at the FDIC in recent years, from a low of 14.1% in 2014 to a high of 18.8% in 2016.

“Improving diversity and inclusion at the FDIC is not theoretical or merely academic to me; it is personal,” FDIC Chairman Jelena McWilliams said in a statement to Bloomberg Law.

The FDIC, which has about 5,800 employees, has overhauled how it recruits, trains, and retains minorities into its bank examiner staff. Examiners represent nearly 47% of the FDIC’s workforce and the positions serve as an entry point for advancement to senior level positions, the FDIC said in its 2019 report.

“Individuals who began their FDIC careers as entry-level examiners tend to occupy a significant percentage of executive and managerial leadership positions at the agency,” the agency said in its 2019 report.

Since McWilliams took over at the FDIC in June 2018, minorities have accounted for 33% of new bank examiner hires, above the agency’s overall 30% minority workforce representation, according to data provided by the agency.

Women, by comparison, comprised about 45% of the FDIC workforce in 2019. At the NCUA, they made up about 44% of the staff.

Pipeline Issues

The FDIC still faces challenges to retaining minorities in its workforce, according to its most recent report. A significant one is due to the multiyear commissioning process required to become a bank examiner, as well as the amount of travel required of that role.

The agency has worked to bring the examiner commissioning period down to three years, from four years, and implemented more self-guided, online training to spare employees traveling from all over the country to Washington, D.C. for in-person training, an agency spokeswoman said.

With many examiners spending 89 nights, on average, away from home over the course of a year, the FDIC has also implemented more methods to cut down on work-related travel. While those changes impact the entire examiner corps, the expectation is that the agency will retain more minority examiners overall by making quality-of-life changes for employees.

The FDIC will also now factor efforts to recruit and retain minorities into supervisors’ annual performance reviews. It is also implementing programs for lower-level but high performing staff to receive coaching and exposure to executive positions within the agency they may want to apply to.

Hurdles remain, however, for minorities to rise through the FDIC’s ranks. Many employees spend much of their careers at the agency, with the average tenure pegged at 25 years. That results in limited turnover for leadership positions, the spokeswoman said.

‘Walk the Walk’

Hood has made increasing diversity within the NCUA and the credit union industry a priority of his chairmanship, saying in speeches that financial inclusion is “the civil rights issue of our time.”

His more high-profile work has included a summit on diversity, inclusion, and equity with credit union and NCUA officials last year and the creation of a Culture, Diversity, and Inclusion Council at the agency. The group, which is made up of employees across the agency, has been tasked with surveying NCUA staff and finding areas where the financial regulator can improve on culture, diversity, and inclusion.

Hood has said the NCUA with its roughly 1,100 employees is striving to be a model for the credit union community, where minorities only make up the majority of the member rolls and board seats at about 10% of these institutions, according to the agency. The number of minority credit unions has dropped about 36% from 805 in 2013 to 514 in 2019, as the number of credit unions overall has fallen, NCUA data shows.

“We must always remember that if we’re going to ‘talk the talk’ about the importance of equity, we must also be prepared to ‘walk the walk,’ modeling equity in our own ranks just as we expect others to do,” Hood told Bloomberg Law.