UK Finance has published its responses to the PRA and FCA papers on D&I in the financial sector.
Key points in its response include:
- that the regulatory approach in terms of transparency and accountability should have appropriate flexibility built in, for instance in strategy and targets, to allow for the differing operating models of firms and how they serve their customers;
- it is imperative for there to be consistent definitions and alignment with existing initiatives because only that will enable firms to report progress and give context to outcomes;
- some firms are not sure whether the quantitative, target focussed approach to D&I in the current proposals is the most effective way to delver progress, and note that there must be a credible rationale for collecting data that will be disclosed – and that it will take time for firms to put in place meaningful strategies and targets for data-led initiatives;
- investigation and reporting of backgrounds and behaviour must ensure individuals are treated fairly and is consistent with employment law and other legal and regulatory requirements – UK Finance calls for a clearly set out explanation of how and to what extent employers should be examining employees’ personal and private lives, and how sensitive information will be protected in line with GDPR;
- “prefer not to say” should be a valid personal choice for demographic data, and religion should just be a voluntary characteristic for collection;
- firms should have flexibility to use their own inclusion questions and map them to the regulatory suggestions, so long as they meet the same aims;
- the “large firm” threshold should be 751 employees – the current 250 both risks identification of individuals and of limited use because of small sample sizes;
- where firms are in a group, they should have the choice as to the most appropriate group for them to report against; and
- regulators should confirm how the D&I data will be published, how anonymity of individuals will be protected and how differences between the profiles of firms are contextualised.
In relation to the financial misconduct and fit and proper rules, the response asked for more clarify in several areas:
- “bullying” should be defined, and examples of “serious instances” of misconduct given;
- there should be more clarification on what FCA will consider when assessing whether misconduct in relation to an individual colleague is a breach of COCON, and should provide clearer guidance on what “reasonable steps” look like for managers looking to protect staff;
- “disgraceful or morally reprehensible” should be defined;
- throughout, there should be clearly explained plans on how regulators would want firms retrospectively to challenge employees and should be clear on timescales;
- the more examples the FCA can give of things that may lead to it considering individuals not to be fit and proper, the better;
- the distinction between workplace and personal conduct is not always clear;
- proposed changes to the Sustainability Threshold Conditions should be limited to employees and not the wider “connected to the firm” as proposed;
- consistency with employment laws – for example, the extent to which conduct outside the workplace can be investigated and what level of investigation should be carried out, especially where a finding that an individual is not fit and proper will probably mean they can no longer work in the sector.
In relation to the governance provisions, there should be clearer guidance on what is meant by “board” in the context particularly of international firms. And there should be more guidance on the level of importance firms should place on D&I as a non-financial risk. Firms also need more guidance on expected strategy, especially those with overseas head offices.
Specific comments on data and disclosures included:
- high “prefer not to say” or non-disclosures should not be used to infer a lack of inclusiveness – and differing cultures and in some cases laws of other jurisdictions may mean the inclination or the requirement not to seek or report certain data; and
- while many areas of data are very useful, firms may face significant challenges in obtaining some of the information and it should not be mandated.
All in all, UK Finance agreed at least in part with most of the proposals, but felt many of them lacked the detail firms need.