FCA, PRA and BoE launch diversity consultation for financial services

The Financial Conduct Authority, the Prudential Regulation Authority (PRA) and the Bank of England have launched a joint consolation to improve diversity and inclusion in regulated firms.

As part of a discussion paper, the financial bodies have introduced a set of policy options to improve inclusion in the financial sector, including the use of targets for representation, and measures to make senior leaders directly accountable for diversity and inclusion in their firms.

All parties believe that improving diversity will advance each of their objectives by improving governance, decision-making and risk management within their organisations.

In response to the consultation, Nikhil Rathi, the chief executive of the FCA, said: “We are concerned that lack of diversity and inclusion within firms can weaken the quality of decision-making.

“We look forward to an open discussion on how we should use our powers to further diversity and inclusion within financial services, to the mutual benefit of firms and their customers.”

Sam Woods, the CEO of the PRA, said: “While some progress has been made to improve diversity and inclusion in parts of the financial services sector over the last decade, the discussion is still in its early stages, and more needs to be done to speed up progress.

“Regulators and industry need to work together to increase diversity at senior levels and ensure that the UK’s financial services firms are best equipped to serve the economy.”

He added: “A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness.”

Sir Jon Cunliffe, the deputy governor for financial stability at the Bank of England, said: “Diversity and inclusion is beneficial for financial stability. Groupthink and overconfidence are often at the root of financial crises.

“Enabling a diversity of thought and allowing for an array of perspectives to coexist supports a resilient, safe and effective financial system.”

He added: “The paper we have published invites a discussion on our thinking on how the industry, including Financial Market Infrastructure firms (FMIs), can develop its approach to diversity and inclusion, in line with our objective to ensure sound, robust financial markets.”