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  5. United Kingdom: Next steps for diversity and inclusion in financial services - FCA and PRA proposals

United Kingdom: Next steps for diversity and inclusion in financial services - FCA and PRA proposals

05 Dec 2023    2 minute read
Diversity & Inclusion FSR Financial Services Regulatory Sustainability

In brief

In this article originally published in Risk & Compliance Journal written by Baker McKenzie employment and financial services regulatory experts, we explore the diversity and inclusion proposals recently put forward by the UK financial services regulators. 

Contents

Key takeaways

  • Research in financial services has demonstrated a positive link between diversity at senior levels and positive outcomes. However, the financial sector has some way to go: while some progress has been made, large gender and ethnicity pay gaps exist and there remains a lack of diversity at leadership levels.
  • The Financial Conduct Authority and the Prudential Regulatory Authority have released consultation papers proposing to introduce a new regulatory framework on diversity and inclusion in the financial sector. The proposals are substantially the same but the PRA framework contains additional requirements for dual-regulated firms not included in the FCA's proposals, most notably in relation to senior management accountability.
  • Certain firms will need to establish D&I strategies, set appropriate targets for each of the board, senior leadership and the whole workforce, and report a range of D&I-related data annually to regulators.
  • Data collection is therefore a key step to identifying areas for intervention, setting appropriate targets and measuring progress. Mandatory characteristics on which employees would be asked to for consent to data collection include age, sex or gender, ethnicity, disability, religion and sexual orientation.
  • New FCA guidance is proposed that would treat a lack of D&I as a non-financial risk to be addressed across a range of relevant functions, with firms being given flexibility to implement the guidance in a way that is aligned with their business and governance.
  • The FCA recognises that non-financial misconduct may discourage employees from speaking out about concerns, while the PRA has stated its existing expectation that conduct such as bullying and harassment is relevant to assessments of fitness and propriety. The FCA proposals include a number of amendments to explicitly embed non-financial misconduct in its handbook and in the Conduct Rules.
  • This article first appeared in volume 12 issue 6 of Compliance & Risk Journal.

Click here to access the full briefing. 

Contact Information
Monica Kurnatowska
Partner
London
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monica.kurnatowska@bakermckenzie.com
Zelander Gray
Associate
London
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zelander.gray@bakermckenzie.com
Kimberly Everitt
Senior Knowledge Lawyer
London
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kimberly.everitt@bakermckenzie.com
Rachel Farr
Senior Knowledge Lawyer
London
rachel.farr@bakermckenzie.com

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