The FCA Practitioner Panel has responded to CP23/20, the consultation paper on diversity and inclusion in the financial sector. Key points in the response include:
- Mandating that firms collect data across all demographic characteristics, including a number that are highly sensitive to the individuals being asked to provide the information, could result in a higher ‘prefer not to say’ response rate. Clarity is also needed on the level of ‘prefer not to say’ that FCA would deem risky and the consequences of breaching that level, as well as why the FCA seeks this broader, prescriptive diversity data;
- Putting in place set targets and requirements to publicly disclose targets would not be helpful and instead, firms should determine their own approach reflecting their specific D&I journey;
- the Panel welcomes the focus on ‘inclusion’ – however, there shouldn’t be a prescriptive set of questions applied to all firms as each firm will have its own distinct methods of cultivating an inclusive culture;
- Solo entity applications, as opposed to group level reporting, will be burdensome for firms, especially large firms, to implement. There will be significant administrative costs for firms, diverting resources away from those impacting meaningful change. Employees of group entities also usually service a number of regulated entities, so putting in place quantitative reporting requirements for firms in a group could result in misleading figures; and
- There is a need to recognise that what works for a firm in the capture of DEI data varies – no two firms are the same – so the approach to managing risk should be flexible for firms to apply to their non-financial risks.