The Financial Conduct Authority (FCA) will not move forward with proposals to enhance diversity and inclusion in financial services firms through DEI targets.
In 2023, the FCA and Prudential Regulation Authority (PRA) held parallel consultations on proposals to enhance diversity and inclusion, which aimed to foster healthy work cultures, reduce groupthink and unlock talent.
The proposals introduced new rules and guidance clarifying that misconduct, including bullying and sexual harassment, threatens a firm’s culture. They also aimed to enable firms to take decisive and appropriate action against such behaviour.
The measures were designed to strengthen financial firms’ safety and soundness while improving their understanding of diverse consumer needs, based on the belief that greater diversity and regulation would enhance internal governance, decision-making and risk management.
However, the FCA announced that, following extensive feedback on the proposals, it and the PRA will not be moving forward with the plans to avoid placing an “additional burden” on firms.
In addition to scaling back its diversity proposals, the FCA also confirmed it will no longer pursue plans to ‘name and shame’ firms under investigation, a measure originally intended to prevent illicit behaviour through the threat of public disclosure.
The FCA’s decision to withdraw the proposals has sparked disappointment across the sector.
Shelia Cameron, CEO of the Lloyd’s Market Association, said: “Whilst we had lobbied against the name and shame proposals (they had the potential, amongst other things, to harm innocent parties in our view), the stepping back on DEI data reporting is disappointing.”
Meanwhile, Reboot, an advocacy group for DEI in the financial services sector, said: “Diversity is not just a ‘woke’ issue—it is about better decision-making, stronger risk management, and fostering a financial sector that truly serves society. The FCA’s decision is a setback, but it must not become the defining moment for DEI in financial services. Now is the time for leaders across the industry to step up, take ownership, and give their employees the reassurances they need.”