Our role as a regulator: why diversity and inclusion matter in financial services

We know that diversity and inclusion underpin healthy cultures in firms – so they’re important features of how we evaluate firm culture and conduct.

We want to see the benefits of diversity and inclusion result in less harm for consumers, and better functioning markets.

Diversity has many dimensions. People with different life experiences bring new thinking, and their experiences inspire new approaches to problem solving and decision-making. 

Diversity of thought, when supported by a safe and inclusive approach to diverse views, enables employees to contribute fully. An inclusive culture, where diverse views are listened to, will increase understanding of the diverse needs of consumers across society. Diversity and inclusion are vital elements of a healthy culture. Psychological safety is fundamental for inclusion – it is essential that all staff feel safe for them to be included. 

We believe that diversity and inclusion can reduce the risk of harm to consumers and to market integrity. It can also encourage innovation, through the development of products and services designed to meet the diverse needs of all consumers.

In addition, our Public Sector Equality Duty requires us to look for ways to eliminate discrimination, to advance equality of opportunity and to foster good relations between people who share a protected characteristic and those who do not - both within the FCA and in how we regulate firms.

Recent global events and movements, combined with the disproportionate impacts of the coronavirus (Covid-19) pandemic on consumers with certain protected characteristics, have bolstered our ambition to further develop our regulatory approach to diversity and inclusion. This is because as well as meeting our legal requirements, we recognise the clear links between increased diversity and inclusion in firms, healthy cultures and better outcomes for consumers and markets.

Increasing our focus on diversity and inclusion

Within the financial services sector, although there has been increasing recognition of a need for more diverse boards and executive leaders, progress has been limited. We recognise that regulators and industry need to work together to increase diversity and inclusion to accelerate change.

So we have published a Discussion Paper, jointly with the PRA and Bank of England, on diversity and inclusion in financial services, to set out our thoughts on how we can work with all stakeholders to drive change.

This Discussion Paper marks the first stage of a formal discussion with industry and other stakeholders on how we should use our powers to further diversity and inclusion within firms.

It clarifies why we as regulators care about diversity and inclusion, the importance of data, and options for driving change through policy. The Discussion Paper is accompanied by a research review on the impact of diversity and inclusion on achieving better outcomes. This pulls together numerous sources of research and data to show why we see progress in this area as so important.

Our ultimate ambition is to see the benefits of diversity and inclusion reflected in firm governance and culture, and in better outcomes including less harm for consumers, and better functioning markets. 

We want to see more diversity across regulated firms and listed companies. This will contribute to diversity and inclusion being considered in the design and delivery of products and services so that they meet the diverse needs of customers. We also want firms to be better at collecting and using data to monitor progress and target action. 

There are important intersects across our regulatory work, namely our work on culture and governance, our guidance for firms on the fair treatment for vulnerable customers and our proposals on a new Consumer Duty. This work will be a continuing focus for us in relation to pursuing good consumer outcomes through our policy development and supervisory approach. 
We will also issue a survey later this year to help us develop the Discussion Paper’s proposals and test how firms can provide data with a view to regular reporting in the future.

The Discussion Paper is open until 30 September 2021. We welcome your views on the role of regulators in delivering a more diverse, more inclusive industry. We will use the feedback and data received to develop detailed proposals, with a joint consultation planned for Q1 2022.  
You can send your views by email.

Or in writing to: 
Bank of England 
Threadneedle Street
London
EC2R 8AH.