To further its ongoing diversity, equity, and inclusion (DEI) efforts, the New York State Department of Financial Services (DFS) announced an initiative to collect and publish diversity data on the demographic makeup of NY-regulated financial institution’s boards and senior management teams. In its July 29th business industry letter, DFS emphasized that transparency around this data will help measure progress toward DEI goals, allow firms to assess where they stand relative to their peers, and increase transparency and accountability.
Relying on its authority under New York Banking Law §37(3) to require banking organizations to make special reports, DFS will collect data on the gender, racial, and ethnic composition of boards of all New York-regulated (i) banking institutions with over $100 million in assets, (ii) non-depository financial institutions with over $100 million in assets, (iii) and entities authorized to engage in virtual currency business activity. DFS will collect demographic data from 2019 and 2020 starting in late summer 2021, and will publish aggregate data in the first quarter of 2022.
In the industry letter, DFS made plain that it expects financial institutions to make DEI at the leadership level strategic business and corporate governance priorities, emphasizing the importance of developing a pipeline of diverse leaders. DFS underscored data reflecting existing gaps in gender and racial diversity across industry leadership, based in part on the U.S. House Financial Services Committee’s 2019 analysis of bank diversity data.
DFS laid out both business and social rationales for its data reporting initiative. From a business standpoint, DFS highlighted increasing industry-wide investor and government actions to advance diversity in senior management because doing so improves profitability, enhances risk management, and increases employee satisfaction. DFS further asserted that with the challenges posed by the COVID-19 pandemic, racial injustice, and climate change, it is now “paramount that the banking and financial industries have strong boards and executive teams comprised of people with diverse experiences, skills and perspectives in order to better confront evolving risks and find new opportunities.”
Ballard’s DEI Counseling team advises clients across industries on the development, implementation, and enhancement of DEI programs. Our attorneys performs assessments, develops strategic plans, advise on existing programs, develop policies and communication materials, conduct training, and facilitate the implementation of DEI programs.