The FCA and Prudential Regulation Authority (PRA) have today jointly published proposals to introduce a new regulatory framework to boost diversity and inclusion (D&I) in financial services.
Both bodies recognise some progress has been made to date to improve diversity and inclusion in the financial sector but are very aware that more still needs to be done.
In the Consultation Paper (CP23/20) foreword Nikhil Rathi (Chief Executive, FCA) references that 57% of financial services employees from ethnic minority backgrounds still feel their talents are being overlooked, whilst CityWire’s Alpha Female Report 2023 claims the number of female fund managers rose to only 12% in the last year.
We 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.
The FCA believes greater levels of diversity and inclusion can contribute to better outcomes for both consumers and markets. As a result, it has published Consultation Paper (CP23/20) which sets out measures to support healthier work cultures, improve the understanding and provision of diverse work cultures and to unlock talent. Other proposals include improving both data collection and reporting, and setting targets to address under-representation.
The framework will seek to establish minimum standards and also provide firms with a better understanding of what is expected of them in this area from a regulatory perspective.
The Consultation Paper will be of interest to all firms with a Part 4A FSMA permission as well as other parties such as regulated firms who do not have a Part 4A permission, industry groups, trade bodies and policy makers.
Interestingly, some market commentators don't think the proposals go far enough and the FT in particular ('Class and the City', 16 Oct 2023) cited the lack of socio-economic factors as being a concern.
Feedback is requested to questions in the CP by December 18th 2023, after which final regulatory requirements will be readied for publication in a Policy Statement in 2024.
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