Regulators look to improve diversity across financial services sector

The UK’s financial regulators have confirmed they are seeking views on plans to improve diversity and inclusion in financial services.

The FCA, Prudential Regulation Authority (PRA) and Bank of England have set out several policy options in a new discussion paper.

These include the use of targets for representation, measures to make senior leaders directly accountable for diversity and inclusion in their firms, linking remuneration to diversity and inclusion metrics and the regulators’ approach to considering diversity, and inclusion in non-financial misconduct. The paper also focuses on the importance of data and disclosure in order to enable firms, regulators and other stakeholders to monitor progress.

According to the regulators, increased diversity and inclusion will advance their statutory objectives by resulting in improved governance, decision-making and risk management within firms.

Deputy governor for prudential regulation and PRA CEO, Sam Woods, 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.

“The paper we have published today is intended to start a new conversation with firms about how we can best move forward across the sector, while we also take steps to improve diversity and inclusion within our own organisations. I encourage firms and other interested stakeholders to give us their views on our proposals.”

Bank of England deputy governor for financial stability, Sir Jon Cunliffe, added: “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.”

The discussion paper is open until 30 September 2021, and the three regulators indicated they are also asking for views on how any changes could be tailored to specific categories of firms to ensure it is proportionate.

“We are concerned that lack of diversity and inclusion within firms can weaken the quality of decision-making,” commented FCA chief executive, Nikhil Rathi. “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.”

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