DEI faces challenges in the US, but it just got a boost in the UK. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) announced that they are proposing “a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector.” This action builds on the July 2021 Discussion Paper (DP21/2) published by the FCA, PRA and Bank of England. In the Consultation Paper’s introduction, the regulators state that they “have been clear that diversity and inclusion are regulatory concerns. Yet, the evidence suggests the financial services sector is not yet where we should be.”
FCA and PRA are
“…proposing that the largest financial firms, those already required to publish their gender pay gaps, report representation on certain characteristics, for example disability status and ethnicity. As well as giving firms the option to go further, for instance by voluntarily reporting additional data on socio-economic background and gender identity. Doing so will highlight where change is needed, allowing firms and regulators to better target their interventions…
Flexibility is at the heart of our proposals. We want large firms to publish plans for how they will move the dial on diversity and inclusion, but do not think it would be right for us to prescribe what that should look like. Each firm is different. They need to come up with their own solutions. We recognise the need for proportionality for smaller firms.”
General principles of the proposal are for regulated companies to:
- report their average number of employees to us on an annual basis
- collect, report and disclose certain D&I data
- establish, implement and maintain a D&I strategy
- determine and set appropriate diversity targets
- recognise a lack of D&I as a non-financial risk
Comments can be submitted on the FCA website and are due by December 18, 2023.
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