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Diversity and inclusion in the financial sector: the regulators want more done, more quickly

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Few would disagree that a lack of diversity and inclusion in any setting can have a negative impact. The financial sector regulators (the FCA and PRA) are addressing this issue, starting with the publication of a Discussion Paper (DP21/2). The aim is to prompt the firms they regulate to do more, and do it more quickly.

The regulators acknowledge that some progress has been made with industry and sector based initiatives such as the Women in Finance Charter, Race at Work Charter and the Social Mobility Task Force but it is clear that there is still, in the words of the regulators, “a very long way to go”. Their view is that the momentum for change is coming from employee activism exemplified in social movements such as #MeToo and #BlackLivesMatter together with the ESG agenda and the increasing investor focus that has piqued the attention of regulators globally. Certainly it has been noticeable that for some years the regulators have been scrutinising non-financial misconduct (eg bullying, sexual harassment, retaliation and discrimination) and this has dramatically shifted the thinking in regulated firms as to what kind of misconduct is of interest to the regulators.

To accelerate the pace of meaningful change, the FCA and PRA have issued a discussion paper seeking responses to 29 questions. The ultimate goal is to see increased diversity and inclusion in financial services which should translate into safer and sounder firms with better internal governance and risk management. The regulators are asking for comments on this discussion paper from all parts of the financial sector by 30 September 2021, following which they intend to produce rules and guidance. The regulators warn that they “will be prepared to use... regulatory powers, and to take action where appropriate”.

Over the next few weeks, different members of our employment and regulatory teams will discuss a number of important questions posed by the regulators. My blog post later this week will look at the first of these questions on what is understood by the terms diversity and inclusion.