UK financial markets regulators the Financial Conduct Authority (FCA) Prudential Regulation Authority (PRA), and the Bank of England (BoE) announced today the launch of a discussion paper outlining policy options aimed at increasing diversity and inclusion in the financial services sector.
The joint discussion paper, which is open until the end of September, sets out several policy options including making senior leaders responsible for diversity and inclusion (D&I) in their businesses, setting targets for representation, linking remuneration to D&I metrics, as well as a new approach to consider D&I in non-financial misconduct, among others. The paper also highlights the importance of data and disclosure as means of enabling firms, regulators, and stakeholders to monitor progress.
Nikhil Rathi, Chief Executive of the FCA said:
“We are concerned that lack of diversity and inclusion within firms can weaken the quality of decision-making. We look forward to an open discussion on how we should use our powers to further diversity and inclusion within financial services, to the mutual benefit of firms and their customers.”
According to the regulators, increased D&I will result in “improved governance, decision-making, and risk management within firms, a more innovative industry, and products and services better suited to the diverse needs of consumers.”
The regulators suggest collecting data directly from firms about their workforce to evaluate progress over time and a pilot survey will be conducted later this year.
Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA said:
“While some progress has been made to improve diversity and inclusion in parts of the financial services sector over the last decade, the discussion is still in its early stages, and more needs to be done to speed up progress. Regulators and industry need to work together to increase diversity at senior levels and ensure that the UK’s financial services firms are best equipped to serve the economy. A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness.”
Sir Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England, added:
“Diversity and inclusion are beneficial for financial stability. Groupthink and overconfidence are often at the root of financial crises. Enabling a diversity of thought and allowing for an array of perspectives to coexist supports a resilient, safe and effective financial system. The paper we have published invites a discussion on our thinking on how the industry, including Financial Market Infrastructure firms (FMIs), can develop its approach to diversity and inclusion, in line with our objective to ensure sound, robust financial markets.”