FCA, PRA & BoE outline D&I initiatives

The FCA, Prudential Regulation Authority (PRA) and Bank of England have published a discussion paper on regulatory plans to improve diversity and inclusion in financial services.

They believe increased D&I will result in; improved governance, decision-making and risk management within firms; a more innovative industry; and products and services better suited to the diverse needs of consumers.

Who is it for?

• Regulated firms
• Industry groups / trade bodies
• Consumer groups and individual consumers
• Policy makers and other regulatory bodies
• Industry experts and commentators
• Academics and think tanks
• Organisations representing the interests of groups of people

Discussion paper

The following policy options have been set out:

• Use of targets for representation
• Measures to make senior leaders directly accountable for D&I in their firms
• Linking remuneration to D&I metrics
• The regulators’ approach to considering D&I in non-financial misconduct

The document proposes that authorities should collect data from firms about their workforce to assess and monitor progress. 

The discussion paper also laid out plans for a one-off pilot survey later this year, which will help to develop the proposals set out in the discussion paper and test how firms’ can provide data with a view to considering regular reporting in future.

Sam Woods, deputy governor for Prudential Regulation and CEO of the PRA explained that while some progress has been made to improve D&I 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. “Regulators and industry need to work together to increase diversity at senior levels and ensure the UK’s financial services firms are best equipped to serve the economy. A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness.”

Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, agreed D&I is beneficial for financial stability. “Groupthink and overconfidence are often at the root of financial crises,” he said. “Enabling a diversity of thought and allowing for an array of perspectives to coexist supports a resilient, safe and effective financial system.”

Next steps

The discussion paper is open until 30 September 2021.

Responses can be sent via email (dp2_21@bankofengland.co.uk) or in writing to the Bank of England (Threadneedle Street, London EC2R 8AH).

Once closed, the feedback and data received will be used to develop detailed proposals. Additionally, a joint consultation is planned for Q1 2022.

To view the full discussion paper, click here.