City watchdogs target diversity in finance with raft of new rules
The City watchdogs have taken aim at lacklustre diversity and equality in the Square Mile today with a raft of proposals designed to boost representation and stamp out bullying and sexual harassment.
In consultation papers published today, the Prudential Regulation Authority and Financial Conduct Authority set out guidelines and rules to “support healthy work cultures, reduce groupthink and unlock talent”.
The fresh measures will look to enhance the safety and soundness of firms, the regulators said, as well as improve the understanding of a more diverse consumer base.
“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, it’s vital they attract, retain and promote the best talent,” FCA chief Nikhil Rathi said.
“The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.”
The chief of the PRA Sam Woods added that stronger diversity and inclusiveness should make firms “more competitive by enabling them to attract a wider pool of talent”.
Among the regulators’ proposals are plans to force firms to collect, report and disclose certain diversity and inclusion data and establish, implement and maintain a strategy to boost diversity and inclusion, as well as setting targets to improve representation.
The rules will look to formalise the drive towards more diversity in financial services after a number of voluntary and government-led initiatives rolled out over the past five years.
Projects including the Treasury-led Women in Finance Charter, as well as the Parker and FTSE Women Leaders Review have looked to drive more gender and ethnic diversity in the Square Mile.
However, discrimination and poor diversity still plague the financial services sector.
A report last year from campaign group Reboot found that some seven in ten ethnic minorities had experienced discrimination at work in the past year while 82 per cent experienced unwelcome comments based on their background.
The FCA and PRA said that diversity and inclusion is a “broad issue for society”, but the regulators had a role to play where the two issues were “relevant to their objectives”.
The FCA and PRA said they had brought forward the proposals after receiving “broad support” for in a 2021 discussion paper on the subject.
Former head of wholesale enforcement at the Financial Conduct Authority, and now partner at Gibson, Dunn & Crutcher, Matthew Nunan, told Morning Wire it was no surprise the watchdog were clamping down but there were questions hanging over some of the proposals.
“Some statements cause concern. Firms are required to ask certain questions of their staff but where staff decline to answer the PRA states this could indicate a lack of inclusiveness,” he said.
“Similarly, targets must be set and whilst they may be missed, this could lead to regulatory pressure. Neither of these approaches is necessarily wrong, but could easily lead to box-ticking or pressure simply to ‘get the numbers up’ rather than a more nuanced, thoughtful approach.”