FCA proposes measures to promote diversity and inclusion in UK’s financial industry
“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent.”
In a joint effort, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have published consultation papers outlining proposals to elevate diversity and inclusion within the UK’s financial services industry.
The objective is to foster healthier work cultures, mitigate groupthink, and harness untapped talent, while also strengthening the safety and stability of financial institutions and improving the understanding of diverse consumer needs.
Diverse teams within regulated financial services firms are known to contribute to improved internal governance, decision-making, and risk management. This, in turn, enhances the industry’s overall competitiveness, drives innovation, and ensures better outcomes for both markets and consumers.
Guidance to reinforce diversity and inclusion, and address bullying and sexual harassment
The proposed measures encompass a range of rules and guidance designed to reinforce the significance of diversity and inclusion and address issues such as bullying and sexual harassment:
Recognition of Misconduct: New guidance will make it explicit that misconduct, including bullying and sexual harassment, threatens a healthy firm culture. This recognition will empower firms to take decisive and appropriate action against employees engaged in such behavior.
Diversity and Inclusion Strategy: Regulated firms will be required to develop a diversity and inclusion strategy outlining how they plan to achieve their objectives and goals.
Data Collection and Reporting: Firms will need to collect, report, and disclose data related to specific characteristics, fostering transparency and accountability.
Setting Targets: To address under-representation, firms will be encouraged to establish targets, ensuring that diversity and inclusion efforts are measurable and effective.
These proposals are flexible and proportionate, allowing each firm to tailor its approach to its unique circumstances. While the requirements will predominantly apply to larger firms, the intention is to raise the minimum standards industry-wide.
“It’s vital [UK companies] attract, retain and promote the best talent”
FCA Chief Executive Nikhil Rathi said: “For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent.
“The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery. UK financial services has long been a magnet for best-in-class talent globally. Increasing levels of diversity within firms can help attract and unlock talent, supporting the sector’s international competitiveness.
“We have taken a lead among regulators in taking a clear stance that non-financial misconduct, such as sexual harassment, is misconduct for regulatory purposes. We’re strengthening our expectations on how the firms we regulate consider such misconduct when deciding whether someone is fit and proper to work within the industry.”
The UK government, as well as voluntary initiatives like the Treasury’s Women in Finance Charter, have already made strides in promoting diversity and inclusion.
The FCA and PRA believe that regulators have a role to play where diversity and inclusion align with their objectives. The proposals build on feedback received from a 2021 Discussion Paper and aim to set higher standards, particularly for larger firms.