UK financial regulators the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) announced that they have dropped plans to advance new rules aimed at boosting diversity and inclusion in the financial services sector.
The announcements follow the launch by the FCA and PRA in September 2023 of a consultation into a series of rules to introduce a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector. Proposals included requiring firms to develop a D&I strategy, containing objectives and goals, and a plan for meeting them, and placing boards in charge of maintaining and overseeing the strategies.
In letters sent this week to the government’s Treasury Select Committee, however, the regulators backpedalled on their plans for the new D&I rules following feedback, with industry respondents promoting alignment of the regulatory approach with existing initiatives to avoid duplication and unnecessary costs, and to help with efforts to reduce regulatory burdens on firms, and with the Committee’s own recommendation to not proceed with the plans’ data collection proposals.
While the regulators highlighted benefits of D&I for firms, citing “improved internal governance, decision making and risk management” and long-term industry competitiveness, both the FCA and PRA said that “we do not currently plan to publish new rules on diversity and inclusion.”
The announcement comes as diversity and inclusion policies and regulations are also being pulled back rapidly in the U.S. , which began following a Supreme Court ruling that struck down Harvard’s use of race-based affirmative action criteria in college admissions, and led to increased scrutiny over the legality of key aspects of corporate DEI policies, and picked up pace following the election of Donald Trump, who signed an executive order after taking office eliminating DEI preferencing in federal contracting, and required contractors to affirm that they “will not engage in illegal discrimination, including illegal DEI.”
