The Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Bank of England (BofE) has launched a paper aiming to boost diversity and inclusion in finance.
According to the FCA, the trio are seeking views on regulatory plans to improve diversity and inclusion in financial services through the publication of a discussion paper.
In the paper, the three regulators have detailed policy options to strengthen these two areas – including the use of targets for representation, measures to make senior leaders directly accountable for diversity and inclusion in their companies, joining remuneration to diversity and inclusion metrics and the regulators’ approach to considering diversity and inclusion in non-financial misconduct.
The paper also examined the importance of data and disclosure in order to allow firms, regulators and a range of other stakeholders to monitor progress.
The three regulators also highlighted that they believed increased diversity and inclusion will further their own objectives by resulting in better governance, risk management and decision-making within companies. In addition, they believe it will result in ‘a more innovative industry’ as well as products and services better suited to the diverse needs of customers.
In order to assess progress made by organisations, the trio are proposing the collection of data from businesses about their workforce. Before this, there will be a one-off survey later this year to help the three regulators develop the proposals set out in the discussion paper as well as test how companies can provide data with a view to consider regular reporting.
The paper will remain open until 30 September this year, with a joint consultation planned for the first quarter of next year.
PRA CEO and deputy governor for prudential regulation Sam Woods said, “While some progress has been made to improve diversity and inclusion 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 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.”
Woods also commented that the published paper is ‘intended to start a new conversation’ with industry players about how the wider space can best move forward.
BofE deputy governor for financial stability Jon Cunliffe added, “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 (FMIs), can develop its approach to diversity and inclusion, in line with our objective to ensure sound, robust financial markets.”
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