Context
In a published response to the FCA’s Governance and Cross Cutting Standards Policy Team in relation to Consultation Paper CP23/20: ‘Diversity and inclusion in the financial sector – working together to drive change’, the FCA Practitioner Panel has set out its commitment to the ambition to drive greater Diversity, Equity and Inclusion (DEI) and to gain a better understanding of the UK workforce demographics, to sustainably widen the financial services talent pool and foster healthy and inclusive workforce cultures. The Panel believes that all appropriate efforts should be made in pursuit of those outcomes.
Key points to note and next actions
- Data collection – the Panel agrees that collecting and monitoring of D&I data should help drive improvements in DEI in the financial services industry; however, mandating that firms collect data across all demographic characteristics, including a number that are highly sensitive to the individuals being asked to provide the data, may not lead to the intended outcomes. Clarity is needed on what level of ‘prefer not to say’ would be deemed a risk by the FCA and what consequences breaching that level may create. More broadly, greater transparency is needed on what is sought to be achieved by collecting broad, prescriptive diversity data, how it will be used and how it will be stored.
- Target setting and disclosure – the FCA should empower firms to determine their own approach reflecting their specific D&I journey and encourage appropriate supervisory dialogue about that journey.
- Inclusion questions – the FCA’s approach here should remain consistent with its focus on outcomes, not prescriptive process which may create consistency but not necessarily support the intended outcomes.
- A ‘solo entity’ basis (as opposed to group level reporting) will be overly burdensome for firms to implement – especially larger firms with multiple business activities organised efficiently – and there will be significant administrative costs for firms, from identifying employees, upgrading systems, diverting resources away from those impacting meaningful change.
- Non-financial risk – Panel members have differing views on whether or not D&I should be treated as a non-financial risk.