UK regulators the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and Bank of England are seeking views on plans to improve diversity and inclusion in financial services.
In a discussion paper, the three have set out its plans which includes targets for representation, measures to make senior leaders accountable for diversity and inclusion in their firms, and link remuneration to diversity and inclusion metrics. The paper also focuses on the importance of data and disclosure in order to enable firms, regulators and other stakeholders to monitor progress.
Commenting on the news, the deputy governor for prudential regulation and chief executive of the PRA Sam Woods said: “Regulators and industry need to work together to increase diversity at senior levels and ensure that 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.
“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.”
The regulators believe that an increase in diversity and inclusion will result in improved governance, decision-making and risk management within firms - as well as a more innovative industry, and products and services suited to the diverse needs of consumers.
The Bank of England’s deputy governor for financial stability Sir Jon Cunliffe said: “Diversity and inclusion is beneficial for financial stability. Groupthink and overconfidence are often at the root of financial crises.
“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, can develop its approach to diversity and inclusion, in line with our objective to ensure sound, robust financial markets.’
FCA chief executive Nikhil Rathi added: “We are concerned that lack of diversity and inclusion within firms can weaken the quality of decision-making. 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.”
In addition to this, the three regulators are seeking views on how any changes could be tailored to specific categories of firms to ensure it is proportionate. The discussion paper is open until 30 September 2021, with the feedback and data received being used to develop detailed proposals, with a joint consultation planned for the first quarter of 2022.