Why diversity is a regulatory issue

In a speech delivered at the launch of the HM Treasury Women in Finance Charter Annual Review, FCA CEO Nikhil Rathi insisted that the regulator sees diversity and inclusion as regulatory issues. 

‘As an employer, Rathi said, ‘we are determined to improve our own diversity and to work on our culture to ensure it is inclusive. As a regulator, we want the same from the firms we oversee and in the markets we regulate. Not because it is a social good – although, frankly, that should be enough. We care because diversity reduces conduct risk, and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.’

In more concrete terms, Rathi noted that the FCA is working with the Prudential Regulation Authority on a joint approach to diversity and inclusion for all financial services firms. He said the FCA ‘will increasingly be asking tough questions firms about representation across grades and whether their culture is open and inclusive and provides a safe space for colleagues at all levels of the organisation.’

Rathi claimed that, by challenging the financial services sector to do better, the HM Treasury Women in Finance Charter is making a positive difference. As we emerge from the Covid-19 crisis, he said that diversity will be a crucial component in the FCA’s consideration of vulnerability, as the pandemic has disproportionately affected women and people of colour. He added that the FCA will be looking at whether to make diversity requirements part of its premium listing rules.

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