UK regulators want to boost diversity and inclusion in the financial services sector by requiring firms to set targets and making clear that a banker’s private behavior can be relevant to determining their suitability to work in the industry.
The proposals include guidance that stresses bullying and sexual harassment at the workplace or in a person’s private life are both relevant to a finance worker’s “fitness and propriety,” the Financial Conduct Authority said in a statement Monday. The watchdog has faced criticism for being too slow to investigate non-financial misconduct.
“It is a real positive to see the FCA explicitly highlight sexual harassment as a key priority,” said Louise Mullany, a professor of Sociolinguistics at the University of Nottingham. The FCA should enforce the rules at the end of its consultation period in December, Mullany added.
The Prudential Regulation Authority and FCA — the City of London’s twin regulators — are seeking views from the industry until Dec. 18, and plan to publish their final rules next year.
Under the proposed rules, an investment firm with 400 employees would also have to:
- Maintain an effective D&I strategy
- Set appropriate diversity targets
- Collect demographic and inclusion data from staff, reporting this to the regulator and disclosing it on an aggregate basis
- Recognize a lack of D&I as a non-financial risk
It is expected that firms will have to report their progress to the regulator, who could impose a fine for those who don’t meet targets, but the FCA is unlikely to set out what any repercussion will look like until the consultation period is over.
The move comes as financial companies around the world consider reducing headcount in different teams, with D&I groups concerned that their teams will be particularly affected following a similar exercise at technology firms.
The FCA previously suggested that it would ask firms to tie bonuses to D&I goals but in its latest statement said it may consider changes when it updates its remuneration rules.
--With assistance from Jonathan Browning.
(Updates with quote in third paragraph and more details on proposals throughout.)
