The UK Financial Market Regulator, the Financial Conduct Authority (FCA), initiated a public consultation on Monday, September 25th, regarding proposed future rules on diversity and inclusion in the UK financial sector. Its proposals aim to better incorporate considerations related to misconduct that is not of a financial nature into assessments of staff suitability and ethics, as well as into the conduct rules of companies.
The idea is that greater diversity could ultimately help facilitate the medium to long-term growth and international competitiveness of the UK economy.
The measures being consulted on also include new rules and guidance to make clear that misconduct such as bullying and sexual harassment poses a risk to sound firm culture.
What is the plan?
The FCA intends to require financial sector companies to annually disclose various diversity, equity and inclusion (DEI)-related data in addition to their employee counts. It proposes that these firms establish and implement a strategy in this regard, set and work towards diversity objectives, all while recognizing the lack of diversity and inclusion as a non-financial risk to their operations.
The FCA specifies that these rules will depend on factors such as company size, with companies having fewer than 251 employees exempt from certain obligations.
“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent,” said Nikhil Rathi, FCA’s chief executive officer. “The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.”
Which key measures for DEI reporting?
Among other measures, the FCA suggests introducing the provision of a report by financial sector firms containing data collected both on a mandatory and voluntary basis. Mandatory data may include information on age, ethnic origin, gender (which can also be collected on a voluntary basis), sexual orientation, religion, and potential disabilities or health issues. As for data collected on a voluntary basis, this would encompass parental responsibilities, family commitments, gender identity, and socio-economic background.
“Diversity and inclusion play an important role in guarding against groupthink within firms. Firms in which a broad range of perspectives is welcomed and encouraged will manage their risks better, advancing the PRA’s objective of safety and soundness" underlines Sam Woods, chief executive at PRA.
“Stronger diversity and inclusiveness should also make firms more competitive by enabling them to attract a wider pool of talent. We are tabling proposals today which we think will advance our objectives, alongside existing core parts of our regime such as capital and liquidity requirements, and we welcome views on them from all stakeholders.”
"Here at Mixity, we are thrilled to witness such a proactive initiative to collect and analyze companies' Diversity, Equity, and Inclusion performance. It's a significant step forward in promoting positive change." - comments Sandrine Charpentier, Mixity CEO.