Bosses could see pay linked to diversity under City watchdog proposals

The Bank, Prudential Regulation Authority and the Financial Conduct Authority are looking at ways to use their powers to boost diversity.

Men and women figures on coins
Men and women figures on coins

Bosses of financial services firms could see their pay linked to diversity targets under plans set out by the Bank of England and City regulators.

The Bank, Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are looking at ways to use their powers to boost diversity and inclusion in financial services, including the use of targets, regular reporting and linking pay to progress.

Sam Woods Bank of England deputy governor for prudential regulation and chief executive of the PRA, admitted “more needs to be done” to speed up progress on increasing diversity throughout the sector.

We are concerned that a lack of diversity and inclusion within firms can weaken the quality of decision-making

Nikhil Rathi, Financial Conduct Authority

He said: “While some progress has been made to improve diversity and inclusion in parts of the financial services sector over the last decade, the discussion is still in its early stages and more needs to be done to speed up progress.

“Regulators and industry need to work together to increase diversity at senior levels and ensure that the UK’s financial services firms are best equipped to serve the economy.

“A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness.”

In a discussion paper on increasing diversity, the regulators are proposing to make senior leaders directly accountable for diversity and inclusion in their firms, with a focus on data and disclosure to allow regulators to monitor progress.

It comes after recent data has suggested there is woeful representation of women and black, Asian and minority ethnic (BAME) groups in senior leadership roles across the sector.

The 2021 Women in Finance Charter Annual Review found under a third – 32% – of senior manager roles were held by women on average – edging up less than one percentage point year-on-year since 2017.

While gender balance progress has been made across the FTSE 100 thanks to the Hampton-Alexander Review, a recent report by Women on Boards UK found less than half of listed firms outside of the biggest 350 companies have met targets for women in the boardroom.

There are also worrying signs that the situation for ethnic minorities may be going into reverse, with this year’s Green Park Business Leaders Index showing a decline in the number of black leaders within FTSE 100 companies.

It revealed fewer than one in 10 financial services management roles are held by BAME people.

The City regulators said they believe it is vital to increase diversity to improve governance, decision-making and risk management within firms, as well as to promote a more innovative industry.

The FCA is already looking into how it can increase diversity within listed firms, with more details due over the coming months.

FCA boss Nikhil Rathi said: “We are concerned that lack of diversity and inclusion within firms can weaken the quality of decision-making.

“We look forward to an open discussion on how we should use our powers to further diversity and inclusion within financial services.”

A one-off pilot will be conducted later this year to gather data on diversity within workforces as the regulators look into the possibility of regular reporting from firms in future.

They are also seeking views on the discussion paper, which remains open until September 30, with a view to launching proposals under a joint consultation in the first quarter of 2022.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in