Driving Meaningful Change in Diversity and Inclusion in the Financial Sector

Diversity and inclusion (D&I) has featured heavily in speeches by our UK regulators in recent months. The FCA, PRA and Bank of England (the regulators) have now published a discussion paper (DP21/2) which aims to kick-start discussion on how the financial services sector, with the help of the regulators, can “accelerate the pace of meaningful change” in improving D&I within financial services firms.

The policy options being considered in DP21/2 include:

• regular reporting of diversity data to the regulators;
• the use of targets for representation;
• measures to make senior leaders directly accountable for D&I in their firms;
• linking remuneration to D&I metrics;
• having a D&I policy, training on D&I and undertaking a diversity audit; and
• the regulators’ approach to non-financial misconduct, and considering D&I in Senior Managers approvals and assessment of threshold conditions.

The discussion paper also focuses on the importance of data and disclosure in order to enable firms, regulators and other stakeholders to monitor progress.

DP21/2 is relevant to all regulated firms, including insurers, reinsurers and (re)insurance intermediaries. The regulators recognise that D&I will look different for different firms and will not apply a one size fits all approach to D&I.

The proposals in the discussion paper are potentially far-ranging, addressing people-related policies and practices, governance arrangements, accountability, remuneration arrangements, approach to customers and disclosure. Given the importance of the issues raised, the potential for significant change and the level of regulatory scrutiny being proposed, firms should actively engage in this discussion, which is open for response until 30 September 2021.

For more a detailed overview of the policy options proposed in DP21/2, please see our briefing here.