UK Regulators are seeking feedback until December 18 as they prepare to develop rules to boost diversity and inclusion in financial services. 

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) plan to publish final rules next year and have set out proposals to boost diversity and inclusion to “support healthy work cultures, reduce groupthink and unlock talent”. 

The measures aim to enhance the “safety and soundness” of firms and improve understanding of diverse consumer needs.  

Increased diversity and inclusion in regulated financial services firms can deliver better internal governance, decision making and risk management, they say. 

The proposals include new rules and guidance to make clear that bullying and sexual harassment poses a risk to healthy firm culture, and help ensure firms can take decisive and appropriate action against employees for such behaviour.   

FCA CEO Nikhil Rathi says it is vital firms attract, retain and promote the best talent to be competitive. 

"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 said. “Increasing levels of diversity within firms can help attract and unlock talent, supporting the sector’s international competitiveness.” 

The FCA is taking a clear stance that non-financial misconduct, such as sexual harassment, is “misconduct for regulatory purposes”.  

“We’re strengthening our expectations on how the firms we regulate consider such misconduct when deciding whether someone is fit and proper to work within the industry,” he said. 

PRA CEO Sam Woods says a broad range of perspectives helps firms manage risks better, advancing the regulator’s objective of safety and soundness, and should attract a wider pool of talent.  

The proposals include collection of data against certain characteristics, and setting targets to address under-representation. Most would only apply to the largest firms.   

“This work considered evidence that a lack of appropriate challenge and groupthink on boards has been a shortcoming contributing to serious problems at firms,” the regulators say. 

Research shows female representation in senior management averages around 35%, over 100 of the FTSE250 either have no ethnic minority representation on their boards or did not provide data.