On 4 March 2020, the PRA published a letter it had sent to firms concerning its rules on board diversity.

In the letter the PRA reminds firms of Supervisory Statement 5/16: Corporate governance: board responsibilities particularly its expectation that boards should have the diversity of experience and capacity to provide effective challenge across the full range of their firm’s business. This is of particular importance as a firm’s business changes and the external context evolves, as it may require new skills and perspectives on the board. In line with this, the PRA requires firms to have a board diversity policy in place. The European Banking Authority’s recent report on the benchmarking of diversity practices in February 2020 showed that only 70% of sampled UK credit institutions and investment firms had a diversity policy in place.

The PRA letter states that a firm’s chair should satisfy themselves that their firm is meeting the PRA’s requirements and take remedial action where they are not. In doing so, chairs (and where appropriate chairs of the nomination committee) should consider the extent to which the diversity policy is embedded in recruitment and succession planning for the board, to support constructive debate and challenge on the range of issues facing the firm.

A firm’s chair should expect to discuss the letter with their PRA supervisors through the course of their normal supervisory dialogue.