On 25 September 2023, the FCA published Consultation Paper 23/20: Diversity and inclusion in the financial sector - working together to drive change (CP 23/20) which contains proposals to introduce a new regulatory framework on diversity and inclusion in the financial sector. The aim is to boost diversity and inclusion within firms to support healthy work cultures, reduce 'groupthink' and unlock talent (FCA Press Release). The proposals build on the July 2021 Discussion Paper 21/2: Diversity and inclusion in the financial sector - working together to drive change which received a broadly positive response, with most respondents endorsing regulatory action.
CP 23/20
Proposals in CP 23/20 will require certain firms to do the following:
- report their average number of employees to the FCA on an annual basis;
- establish, implement and maintain a diversity and inclusion strategy;
- collect, report and disclose certain diversity and inclusion data;
- determine and set appropriate diversity targets; and
- recognise a lack of diversity and inclusion as a non-financial risk.
Most of the requirements, including setting targets, regulatory reporting and disclosure, would only apply to the largest firms (as defined in the consultation paper).
Next steps
The consultation is open until 18 December 2023, with the FCA planning to publish final rules (in a policy statement) in 2024. The FCA proposes to bring its rules into force 12 months after publication of the relevant policy statement.
Contemporaneous PRA consultation
The PRA has also published its own proposals regarding diversity and inclusion in PRA-regulated firms (Consultation Paper 18/23 - Diversity and inclusion in PRA-regulated firms), with the regulators working closely to develop a consistent and coordinated set of proposals for consultation.
First published on the Corporate News Service on 25 September 2023.
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