The charter is based on recommendations from a review undertaken by Jayne-Anne Gadhia, the chief executive of Virgin Money, entitled Empowering Productivity: harnessing the talents of women in financial services.

This found that in UK financial services female representation was around 23% on boards, but only 14% on executive committees.

Gadhia said: ‘Too few women get to the top and this is not just about childcare. Women are leaving because the culture isn’t right. It’s very encouraging that a number of major financial services companies have already agreed to implement our recommendations. As a result, the issue will now be addressed in a way the City recognises. Make it public, measure it and report on it. What gets published gets done.’

The review said that financial service firms should connect parts of the remuneration packages of their executive teams to gender balance targets.

This forms the basis of one of the four pledges in the Treasury’s new ‘women in finance charter’ designed to promote gender diversity. This states organisations should have ‘an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets on gender diversity’.

The other three pledges are having one member of the senior executive team who is responsible and accountable for gender diversity and inclusion;  setting internal targets for gender diversity in senior management; and publishing progress annually against these targets in reports on the company’s website.

Gadhia is the first bank chief to sign the charter on behalf of Virgin Money, and was joined at the charter launch by representatives of Lloyds Banking Group, Barclays, HSBC and the Royal Bank of Scotland.

Columbia Threadneedle will be the first asset management firm to sign up, while Capital Credit Union will be the first mutual. The Treasury will publish a list of the firms who have signed up to the charter after three months.

Signing the charter also commits firms to supporting the progression of women into senior roles in the financial services sector by focusing on the executive pipeline and the mid-tier level.

It recognises the diversity of the sector and that firms will have different starting points, and says each firm should therefore set its own targets and implement the right strategy for their organisation, but says firms should publicly report on progress to deliver against these internal targets to support the transparency and accountability needed to drive change.

The Gadhia review, which included interviews with 3,200 people plus roundtables and other outreach work, highlighted a number of best practice targets to help financial services companies to get more women into senior management positions.

They include investment in supportive line managers, creating the right culture, providing technology which supports flexible working, ensuring there are transparent pay structures, increasing the number of female role models, implementing good flexible working policies, supporting working parents, offering mentoring schemes and active sponsorship, and providing opportunities for women to gain commercial experience.

Harriett Baldwin, economic secretary to the Treasury, said: ‘It is fantastic that a number of leading banks have already committed to sign up to our new “Women in finance charter” and I encourage all firms across the sector to follow suit.

‘Removing the barriers which prevent women from fully realising their potential in the labour market is a crucial part of improving the UK’s long-term economic performance.

‘Financial services can lead the way as the sector with the highest pay in the UK and the widest gender pay gap. The widespread adoption of the review’s recommendations will help make a genuine difference to gender diversity in financial services.’

Jon Terry, UK finance services people leader and partner at PwC, welcomed the review, saying firms are much more likely to make sustainable progress on diversity if they are convinced there is a business imperative to do so, with the review detailing the social and economic benefits. However, he said some organisations could struggle with the decision about whether to sign up for the voluntary charter. 

'It’s worth noting that the recommendations require significant changes for most financial services firms if they wished to comply. In particular, reporting expectations go significantly beyond those of the new gender pay reporting requirements for all UK employers with over 250 employees and includes an expectation to disclose information on a wide range of diversity metrics including gender split of new hires and new promotions.

'The additional reporting recommendations will put considerable pressure on financial services firms to demonstrate meaningful change in gender diversity. Smaller firms particularly, will welcome the introduction of a concept of proportionality, which acknowledges that firms that are small in asset size and employee numbers should not be expected to sign up to the charter, although many may decide to do so.

'The immediate publication of the charter suggests an expectation that firms who wish to comply should sign in the near future. However, it is unclear what the time frame for "compliance" is. This is particularly challenging because a number of aspects of the recommendations could require fundamental changes to data gathering, policies, processes and systems that will take time to get right. One example of this is remuneration, where changes to bonus measures could potentially require a new vote from shareholders,' Terry said.

The Women in Finance Charter is here

The Gadhia report, Empowering Productivity: harnessing the talents of women in financial services, is here