Lucinda Dhesi

FCA and PRA publish Consultation Paper on Diversity and Inclusion

The FCA and PRA are consulting in parallel on diversity and inclusion in financial services. 

The FCA’s Consultation Paper is available here and the PRA’s is available here. These papers follow an initial Discussion Paper in July 2021 and contain recommendations and requirements which will impact current approaches to diversity and inclusion (D&I) for some firms. While the FCA and PRA papers do differ in some areas, they are broadly aligned across the key proposals.

The FCA and PRA Consultation Paper proposes to introduce new regulation and adjustments to existing regulation across a range of policy areas (some subject to proportionality). These include proposals to:

  • Require some firms to:
    • report their average number of employees on an annual basis 
    • collect, report and disclose certain D&I data  
    • establish, implement and maintain a D&I strategy 
    • determine and set appropriate diversity targets
    • recognise a lack of D&I as a non-financial risk 
  • A number of key proposals are also subject to proportionality and therefore apply only to larger firms. Larger firms are defined as those with 251 or more employees within an entity, broadly aligned with UK gender pay gap reporting requirements. This proportionality applies at an entity level (as do all the requirements within the consultation papers)  
  • Better integrate non-financial misconduct considerations into staff fitness and propriety assessments, Conduct Rules and the suitability criteria for firms to operate in the financial sector (Threshold Conditions)

The IA is currently in the process of reviewing these proposals in order to assess their impact on members and will be submitting a response to the CP by the deadline of 18 December 2023. We will provide an update in due course as to next steps on the IA response but in the meantime, we invite members to get in touch with Shrena Fraser Johnson [email protected], should they have any immediate views that they wish to share.

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