On 12 December 2022, the FCA published a firm wide review on understanding approaches to D&I in financial services.
In July 2021, the FCA published a joint Discussion Paper with the PRA and the Bank of England. The Discussion Paper discussed the current state of diversity and inclusion in the financial services industry, setting out the case that more progress advances the FCA’s objectives and proposed some areas for potential policy intervention. The FCA will consult on these proposals in 2023.
In the meantime, the FCA decided to get a better understanding of the current state of diversity and inclusion approaches in regulated firms. This work involved a sample of 12 ‘fixed’ (generally larger) firms across multiple sectors and a pilot data survey. The work had three goals:
- To give firms and others a picture of the current position, allowing leaders to consider where initiatives might be relevant in their own firms.
- To encourage further industry action.
- To help the FCA to develop a supervisory approach that it can use as a basis for future engagement with firms.
The FCA’s findings following this work included:
- There was a surprising degree of consistency among firms. All were early in the development of their approach on diversity and inclusion, typically having started serious efforts in 2019 or 2020.
- Many firms’ strategies were generic and did not take a holistic review. They lacked a clear articulation of purpose and actions orientated to achieving their goals.
- None of the retail firms had undertaken substantial work on the diverse needs of their consumer base, though a few had recognised the need for this.
- On both gender and ethnicity, firms tend to focus most on improving representation at senior leadership level.
- There is wide variation in data quality. Firms with better diversity data had a better understanding of their position and were better placed to decide which actions to take.
- Few firms had taken steps to address social mobility. Where they had, this focused on the entry points, with less attention to the cultural experience of employees from less socially privileged backgrounds.
- Most firms did not have strategies that clearly linked diagnosis, action and measurement. The level of detail covered in strategies was variable. Many firms had high-level strategies that would benefit from more definition and struggled to give clear examples of how they were going to reach their goals.
- Firms’ strategies often heavily relied on measures such as training courses and information hubs. The FCA believes that there is a role for these initiatives but that, if they are the centrepiece of a strategy, research suggests they are unlikely to tackle ingrained, systemic biases or bring about the kind of culture change needed.
- Generally, firms were making relatively little use of qualitative feedback, such as focus groups, using network/employee resource groups and exit interviews.
The FCA encourages all firms to consider its findings in the development of their diversity and inclusion strategies and practices.