FCA Releases Discussion Paper on Diversity and Inclusion

The FCA, Prudential Regulation Authority (PRA) and the Bank of England have released a discussion paper which sets out their plans to improve diversity and inclusion in regulated firms.

Increased diversity and inclusion will result in improved governance, decision-making and risk management within firms, the regulators believe. It will also enable a more innovative industry with products and services that are better suited to customers’ diverse needs.

The discussion paper (DP21/2: Diversity and inclusion in the financial sector -working together to drive change) outlines some potential policy options, including:

• using targets for representation
• measures to make senior leaders directly accountable for diversity and inclusion in their firms
• the regulatory approach to considering diversity and inclusion in non-financial misconduct
• linking remuneration to diversity and inclusion metrics

It also looks at the importance of data collection, reporting and monitoring in measuring progress.

This discussion paper is relevant to all regulated firms. The FCA has stated that diversity and inclusion is “important across the whole financial services sector”.

Chief Executive of the FCA, Nikhil Rathi, said, “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.”

Feedback on the paper is welcomed by 30 September 2021. This will be used to develop the more detailed proposals, and a joint consultation is to be expected in Q1 2022.

Responses can be sent in writing to Bank of England, Threadneedle Street, London, EC2R 8AH; via email at dp2_21@bankofengland.co.uk; or via telephone on 020 3461 4695.

We will provide further updates on this discussion paper in future articles.