Carolyn D’Souza identifies a potentially potent new approach from the FCA, which may embed diversity requirements in its regulatory regime.
As many businesses take a long and careful look at the diversity of their organisations in the wake of Black Lives Matters and #MeToo, the new CEO of the Financial Conduct Authority, Nikhil Rathi, has recently said that Diversity & Inclusion are regulatory issues which he would like to see embedded into the regulatory framework for financial services by means of a sixth conduct question, as follows:-
“Is your management team diverse enough to provide adequate challenge and do you create the right environment in which people of all backgrounds can speak up?”.
According to Mr. Rathi, less than 1 in 10 management roles in financial services are held by BAME employees, and only 17% of individuals approved by the FCA (who are, generally speaking, the most senior personnel in financial services) are female. Women in financial services still receive 28% less pay than men.
What would regulatory intervention in D&I in the financial services context look like? The FCA (with whom the PRA will adopt a joint approach on D&I issues) has suggested that if it does not see improvements in diversity at senior levels in coming years, it will consider using its supervisory powers in response, which could mean that the senior manager approval process might take poor D&I metrics into account.
A powerful weapon, if used.