Proposals to boost diversity and inclusion in financial services to support healthy work cultures, reduce groupthink and unlock talent have been included in a consultation paper released by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
The proposed rules aim to see increased diversity and inclusion in firms translate into better internal governance, decision making and risk management, which contributes to promoting the safety and soundness of firms, policy holder protection and better outcomes for markets and consumers.
Last year, Deloitte reported that just 19% of executive positions in banking, capital markets and payments are held by women. Meanwhile, the latest Parker Review found that more than 100 of the FTSE 250 either have no ethnic minority representation on their boards or are unable or unwilling to provide data.
“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, it is vital they attract, retain and promote the best talent. The data suggests this is not happening,” said FCA chief executive, Nikhil Rathi (pictured).
“Our proposals will encourage the largest firms to put in place plans and report against their delivery. UK financial services have 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.”
According to the two authorities, the proposals set flexible, proportionate minimum standards to raise the bar, placing more requirements on larger firms. These include requirements to develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals; collect, report and disclose data against certain characteristics; and set targets to address under-representation.
The proposals also include new rules and guidance to make clear that misconduct, such as bullying and sexual harassment, poses a risk to healthy firm culture, helping to ensure firms can take decisive and appropriate action against employees for such behaviour.
The consultation on the proposals is open until 18 December 2023.
“This sends a clear message that it is high time that diversity is taken seriously in financial services and that poor office behaviours can no longer be tolerated,” commented Priti Verma, chief risk officer at Quilter.
“The financial services sector needs to go much further to break down perceptions that it is a ‘boys’ club’, as it is this that directly prevents women and girls viewing financial services as a potential career. The regulator’s intervention is a timely reminder us all about how important diversity at the very top is in setting a healthy corporate culture, where people are free to speak. And that includes diversity in general – not just gender diversity.
“It is our hope that young women across the country view the plethora of roles within financial services, including financial advice, as a potential option for them. It is no secret that the financial services industry needs to better reflect the customers it is serving and that includes recruiting more women as well as more people from diverse backgrounds.”