In recent years, the FCA has been increasingly vocal about the importance of diversity and inclusion (D&I) in relation to firms' culture, governance and risk-management, and has also spoken increasingly about its views concerning non-financial misconduct.
Now, the FCA has published a Discussion Paper (DP) designed "to engage financial firms and other stakeholders in a discussion on how we can accelerate the pace of meaningful change and what role we can most usefully play to support this change."
Comments are sought (by 30 September 2021) on 29 detailed and thoughtful questions, which range from whether any terms used in the FCA Handbook, PRA Rulebook or Supervisory statements or other regulatory policies could be made more inclusive, to whether remuneration should be linked to D&I as part of non-financial performance assessment; from whether firms should be required to have and publish a D&I policy, and which parts of those policies, if any, should be mandatory, to what data regulators could monitor to understand whether increased D&I is supporting better decision making within firms.
Accelerating the pace of meaningful change requires many things, not least a willingness to challenge the status quo, to have uncomfortable conversations and to be transparent with data and metrics. Let's hope that firms engage with this discussion, and that it leads to well-meaning words and policies being translated into actions and meaningful change.
"We expect to see diversity and inclusion become part of how we regulate and part of how the UK financial sector does business. For the Bank of England and the PRA, the key consideration is about the linkage between insufficient diversity and inclusion and groupthink, which can present a serious risk to safety and soundness. Our goal is to see increased diversity and inclusion in financial services translate into safer and sounder firms with better internal governance and risk management, a more innovative industry, and financial products and services that meet the diverse needs of consumers."