The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have proposed new measures to boost diversity and inclusion in financial services.

The regulators said the move would help to support “healthy work cultures, reduce groupthink and unlock talent”.

They added that the measures would aim to improve the safety and soundness of firms, as well as the understanding of diverse consumer needs.

The FCA says that the proposals include new rules designed to make clear that misconduct, including bullying and sexual harassment, poses a risk to healthy workplace culture, explaining that the guidance would “help ensure firms can take decisive and appropriate action against employees for such behaviour.”

“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent,” said FCA chief executive, Nikhil Rathi. “The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.”

He added: “UK financial services has long been a magnet for best-in-class talent globally. Increasing levels of diversity within firms can help attract and unlock talent, supporting the sector’s international competitiveness.”

PRA chief executive Sam Woods said that the organisation is "strengthening its expectations" on how the firms it regulates considers non-financial misconduct when deciding whether someone is fit to work in the industry.

The financial watchdogs, which will require more requirements on larger firms, is calling for financial services companies to develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals, collect, report and disclose data against certain characteristics, and set targets to address under-representation.

The FCA said that most of these requirements, including setting targets and regulatory reporting and disclosure, would only apply only to the largest firms. 

The consultation is open until 18 December 2023.

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