In a sweeping set of policy recommendations, the Financial Conduct Authority (FCA), the Bank of England and the Prudential Regulation Authority (PRA) said firms in the financial district of London – known as the “City” – have not done enough to increase diversity and narrow the gender pay gap. These plans could be tailored to specific categories of firms to ensure proportionate impact, they added.
Financial services firms in the UK should be required to link pay to metrics on diversity and inclusion and make those at the top directly accountable for falling short, the financial regulators have put forward. Proposals to combat the lack of change included using targets for representing unreserved groups, and revising the regulators’ approach to tackling diversity and inclusion in areas of non-financial misconduct, such as workplace sexism, homophobia and sexual harassment.
The UK’s top three financial regulators said last month in a discussion paper that they had collaborated to develop a more robust standard on equality, to ensure widespread change across the industry. Data included in the paper showed that last year, only 13 of the chief executives at the top of FTSE 350 companies were women, or 5 per cent, while female representation at senior management reached 32 per cent on average.
While the statistics for women have been improving over the years, the regulators said “the situation for ethnic minorities shows signs of going into reverse.” Chief executive of the FCA, Nikhil Rathi, said in a statement alongside the paper: “We are concerned that the lack of diversity and inclusion within firms can weaken the quality of decision-making.” The authorities have proposed collecting data from City firms about the make-up of their workforce, issuing a survey to help develop the proposals and test how companies can provide data to support regular reporting on diversity and inclusion.
Deputy governor for financial stability at the Bank of England, Sir Jon Cunliffe, said: “Groupthink and overconfidence are often at the root of financial crisis.” He added: “Enabling a diversity of thought and allowing for an array of perspectives to coexist supports a resilient, safe and effective financial system.” Industry initiatives to improve diversity such as the Women in Finance Charter and the Race at Work Charter have largely relied on “exerting peer pressure for change,” the two leaders said in a joint statement alongside PRA deputy governor Sam Wood.
More than half the firms that signed up to boost gender diversity as part of the Women in Finance Charter last year failed to do so, including companies such as Black Rock, Deloitte and PwC, as well as regulators themselves, including the Bank of England. Rathi admitted last month the FCA also has “more work to do” on achieving an inclusive environment inside the watchdog, falling behind its target on female representation and ethnic minority action.
The FCA has a target for women to make up 50 per cent of its senior leadership positions by 2025. The regulator’s top team was 40 per cent female in September last year, with no change from a year earlier, while the percentage of those from minority ethnic backgrounds rose from 7 per cent to 10 per cent.
The pandemic may have caused a ‘slow down’ in the fight for diversity within the financial sector. But while the crisis may have shifted some attention away from the issue and can lead to the retreat of those who would otherwise strive to make a change, finding ways to maximise female access to professional development must remain a priority in every sector. (The writer is our foreign correspondent based in the UK)
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