Responses to D&I in the Financial Services Sector

Following UK Finance’s response, several further responses to the PRA and FCA consultation papers (CP 23/20 and PRA’s CP 18/23) share insights into diversity and inclusion in the financial services sector.

In its response, the Lloyd’s Market Association (LMA) expressed full support for enhancing diversity and inclusion in the financial sector, emphasising its critical importance. The LMA has implemented multiple initiatives since 2019, including policies, governance changes, talent programs, and culture reporting, aiming to foster a more inclusive market. However, it does call for proportional and practical regulations, especially for smaller firms, highlighting the need for diverse perspectives beyond standard diversity metrics. The LMA raised concerns about the complexity of proposed non-financial misconduct regulations, suggesting separate consideration and a comprehensive cost-benefit analysis. It also highlighted operational challenges in data collection, proposing amendments for a clearer regulatory framework and emphasised the importance of contextual understanding when evaluating diversity metrics. The LMA expressed willingness to engage further in discussions to ensure the effective implementation of proposed regulations.

In its joint response, the Building Societies Association (BSA) expressed appreciation for the overall approach and proportional nature of the proposals, recognising their potential to enhance diversity and inclusion within financial services. However, the BSA raised queries about the regulators’ choice not to mandate the collection of socio-economic data, especially for larger firms, which it considers crucial for a comprehensive understanding of diversity metrics. Additionally, while expressing support, the BSA approached the potential expansion of these proposals in the future cautiously, emphasising the importance of maintaining a balanced perspective on reporting requirements to ensure practicality and feasibility across firms.

In its response  FIA EPTA members expressed strong support for the initiative, recognising its significance in fostering sustainable financial markets. However, its primary focus was on ensuring the proposed D&I framework is beneficial for firms of all sizes in financial markets, voicing concerns about potential shortcomings and unintended consequences. It specifically highlighted concerns regarding the proposed threshold for reporting, suggesting a shift from 250 employees to 1,000 employees for identifying larger firms, emphasising potential distortions in data and unintended consequences for smaller firms. Additionally, it raised apprehensions about the disclosure and data collection requirements being excessively burdensome for smaller firms, potentially hindering progress towards meaningful D&I goals. The members also stressed the necessity for GDPR compliance, the need for flexibility in board member privacy concerns, and urged considerations for jurisdictional differences in implementing D&I strategies and targets, particularly for non-UK headquartered financial institutions.

The response by the Pensions and Lifetime Savings Association (PLSA) commends the initiative as a positive step toward prioritizing diversity and inclusion (D&I). It emphasizes the importance of further development of FCA requirements over time to support firms in integrating proposed measures. The PLSA supports the proportionality framework, yet urges the FCA to be more ambitious in addressing D&I issues. It seeks clarity on various aspects, such as better engagement strategies, proposed characteristics for reporting, and the overall objectives of the D&I approach. The PLSA highlights the need for support to enhance employee engagement and stresses that smaller firms should also be included in the D&I reporting process. Additionally, concerns are raised regarding the effectiveness of data collection, the framing of inclusion-related questions, and the prioritisation of inclusion within the proposals. While acknowledging costs, the PLSA says that prioritising D&I is crucial, urging further considerations of their concerns to shape the final FCA and PRA proposals effectively.

Jasmine Zacher