In a speech on March 17, 2021, the CEO of the UK’s Financial Conduct Authority (FCA), Nikhil Rathi, highlighted how the financial services regulator is prioritizing diversity and inclusion (D&I) initiatives in the near term. Speaking at the launch of the HM Treasury Women in Finance Charter Annual Review, Mr. Rathi outlined why D&I is a key consideration for the FCA, noting that:
“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.”
Key steps the FCA is now taking on D&I include:
- Working with the Prudential Regulation Authority (PRA) on a joint approach to D&I for all financial services firms; and
- Considering whether to make diversity requirements a part of the FCA’s premium listing rules, similar to the approach taken by NASDAQ in the US.
Mr. Rathi also noted that he would like to see a D&I topic introduced to the FCA’s conduct-related guidance, and that D&I could become part of the regulator’s consideration of senior manager applications in the future.
This speech follows a significant amount of work the FCA and the PRA have been doing in recent years in defining how they will take account of culture, diversity and non-financial misconduct in their roles as financial services regulators. Firms are expected to have careful regard to speeches and other publications when considering how to approach regulatory compliance. Coming from the FCA’s new CEO, this speech is likely to be seen as a particularly important statement on D&I and the FCA’s regulatory priorities going forward.
For more on D&I-related issues, we highlight the link between gender equity and ESG more broadly in our recent article, “A Time to Shine — ESG Drives Gender Equity in Leadership”.