Bank of England Abandons New Diversity Rules for Financial Sector

The Bank of England has announced that it will not implement new rules promoting diversity and inclusion within the financial sector. This decision is aimed at preventing any additional regulatory burdens on firms, particularly in light of a broader initiative to stimulate economic growth.

This announcement came from the Bank's regulatory body, the Prudential Regulatory Authority (PRA), on Tuesday. The decision follows a trend in the United States, where major companies have started to eliminate their diversity goals after former President Donald Trump criticized workplace equality initiatives.

In a letter addressed to Meg Hillier, chair of the Treasury Committee in Parliament, the PRA's chief executive, Sam Woods, stated that the authority would continue to monitor the risk of group-think amongst the firms it oversees. However, it will refrain from requiring these firms to report on improvements in representation for women and ethnic minorities.

This communication was part of a response to the ongoing parliamentary inquiry titled ‘Sexism in the City,’ which examines issues of misogyny within financial services. This inquiry is a follow-up to a previous investigation in 2018 that was triggered by allegations of sexual harassment within the sector.

Woods reflected on the industry's progress regarding the gender pay gap and the predominant “alpha male” culture. He noted that, while there have been some improvements, the efforts have been merely incremental, with persistent issues of sexual harassment and bullying remaining a big concern.

Despite acknowledging that diversity and inclusion might enhance decision-making and risk management, the PRA reported that firms expressed a desire to avoid redundancy and unnecessary financial costs. They believe that the government’s upcoming legal requirements regarding reporting on gender action plans and the disability and ethnicity pay gap would be sufficient.

Woods also mentioned the importance of reducing regulatory burdens on firms while still meeting their objectives. His emphasis on this point aligns with the recent push from UK chancellor Rachel Reeves to lessen red tape for businesses to foster economic growth.

Recently, the UK’s employment rights minister, Justin Madders, expressed skepticism about whether British firms would follow the U.S. lead in scaling back diversity goals. Several large American companies, such as Google, Amazon, and McDonald’s, have significantly reduced their diversity initiatives after Trump's presidency.

In the UK, however, firms like Deloitte have reassured their employees of continued commitment to diversity goals, while Barclays has reaffirmed its strong focus on inclusion despite shifts happening abroad.

Woods concluded that the PRA would not introduce any new rules on diversity or reassess the issue until after the enactment of any new relevant legislation.

Bank, Diversity, Regulation