The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have launched a consultation paper to boost diversity and inclusion in the industry.
According to the consultation paper, financial services firms will be required to collect, report and disclose diversity data to the regulators.
The new measures aim to enhance the safety and soundness of firms and improve understanding of diverse consumer needs. The proposals also include requirements to develop a diversity and inclusion strategy setting out how the firms will meet their objectives and goals, as well as set targets to address under-representation.
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Also within the consultation, the regulators eye new rules and guidance to make clear that misconduct such as bullying and sexual harassment poses a risk to healthy firm culture and to help ensure firms take appropriate and decisive action for this type of behaviour.
While most of the requirements in the paper would only apply to the largest firms, the FCA has made clear that every firm is different and must come up with their own solutions.
Nikhil Rathi, FCA chief executive, said: “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.”
‘Long awaited’
Claire Cross, partner at law firm Corker Binning, called the consultation a “positive and long-awaited, step forward”.
She added: “The FCA’s published regulatory outcomes in respect of non-financial misconduct have so far focused on those convicted by the criminal courts of serious offences. This provides little help to firms who are having to deal with less clear-cut allegations relating to bullying or sexual harassment in the workplace.
“The FCA and PRA’s consultation documents, which will ultimately feed into formal guidance, follows a trail blazed by the SRA, which last year published its own guidance about sexual misconduct allegations, both inside and outside of the workplace, and its expectations of firms and individuals.”
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Priti Verma, chief risk officer at Quilter, said: “This consultation 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. The financial services sector needs to go much further to break down perceptions that it’s 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.”
Noreen Biddle Shah, founder of Reboot and head of corporate communications at Numis said: “Advancing diversity and inclusion is critical to the financial services industry’s long-term success and evolution. At a time when the UK is vying to maintain its status as a leading hub for talent, companies need to do much more to create workplaces with diverse, equitable and inclusive environments.
“Unfortunately, this is not the current lived experience for many in the industry. As referenced by FCA CEO, Nikhil Rathi, in his foreword of the FCA’s paper published today, our 2022 Race to Equality report showed that 57% of financial services employees from ethnic minority backgrounds still feel their talents are being overlooked. Meanwhile overt discrimination is still rife, with 68% of ethnic minorities having experienced discrimination at work in the previous year.
“Following continued engagement with various government ministers and the regulator over the past few months to discuss diversity and inclusion, Reboot is pleased to see the FCA’s consultation paper published today. The industry has a long way to go to achieve equity for all employees, and today’s consultation is a step in the right direction from the regulator. We welcome the continuation of the FCA’s focus on supporting businesses to drive better standards, and we look forward to reviewing the paper in detail and responding accordingly in due course.”
“Our next UK Financial Services Race to Equity report – due for release in Q4 2023 – will report on the latest progress we are seeing in the sector, and what more needs to be done to Reboot the narrative.”
This story was first written for our sister title, International Adviser.
