The FCA and PRA are consulting on measures to boost diversity and inclusion in the financial services sector, with naming and shaming looming into view.


Stacey wasn't having a good day. The finance specialist, who worked for an international investment bank, had come in to work to find a witch's hat on her desk. This wasn't an isolated incident of sexism: a male colleague doing the same role was paid £40,000 more than her; she received lower bonuses and worse appraisals than male colleagues; she was the butt of sexist jokes in the office; and her line manager often belittled her by saying "not now, Stacey" when she wanted to speak to him, which her colleagues had started to copy.

What did Stacey do? She took her employer to the employment tribunal. Her claims of sex discrimination, victimisation and equal pay were upheld and she was ultimately awarded more than £2 million in compensation – one of the largest awards ever made by a tribunal. The bank was also ordered to complete an equal pay audit and a report on gender pay, and submit them to the tribunal.

This isn't an imaginary scenario; it's a summary of a case called Macken v BNP Paribas, the compensation for which was decided in 2022 – just last year. The range of claims upheld by the tribunal, and its proactive response (in ordering the audit and report, as well as significant compensation) suggest a highly problematic culture at the bank that the judicial system was unafraid to tackle.

Perhaps spurred on by the miserable experiences Ms Macken described in her claim, in order to boost diversity and inclusion (D&I) in financial services firms, the FCA and the PRA published consultation papers on diversity and inclusion on 25 September 2023. The two bodies have worked together to develop a coordinated set of proposals for consultation, which (if implemented) should help to prevent what happened to Stacey occurring in the future. Interestingly, both bodies have recommended the implementation of diversity targets, presumably in an effort to supercharge the currently slow pace of change.

According to the FCA, the proposals are intended to improve outcomes for consumers and markets "by supporting healthy work cultures, reducing groupthink, unlocking diverse talent and improving understanding of diverse consumer needs." It is implicit that they will improve outcomes for staff in regulated firms as well.

FCA consultation

The FCA notes that diversity and inclusion are regulatory concerns, and states that it is clarifying and strengthening its expectations around non-financial misconduct. Its consultation paper contains proposals to introduce a new regulatory framework on D&I in the financial sector, to give firms a better understanding of what is expected from them.

The proposals will require certain FCA-regulated firms to:

  • Report their average number of employees to the FCA every year
  • Establish, implement and maintain a D&I strategy
  • Collect, report and disclose certain D&I data (eg disability status and ethnicity, with optional reporting on socio-economic background and gender identity)
  • Decide and set appropriate diversity targets
  • Recognise a lack of D&I as a non-financial risk.

In addition, the consultation sets out proposals to better integrate non-financial misconduct considerations into staff fitness and propriety assessments, Conduct Rules and the suitability criteria for firms to operate in the financial sector.

The proposals would apply differently to firms depending on their number of employees, their categorisation under the SM&CR and whether they are dual-regulated. Most of the requirements would only apply to the largest firms; smaller firms – with fewer than 251 employees – would be exempt from many of the requirements.

The FCA expects that clearer guidance on non-financial misconduct and discriminatory practices will lead to an increase in the number of disciplinary actions reported to it, and it will be very interesting to see if this is borne out in practice.

PRA consultation

In its paper, the PRA sets out its proposed rules and expectations aimed at improving D&I in PRA-regulated firms.

The PRA notes that there is no single means of improving D&I so firms need to take a holistic approach. Its proposals include:

  • Requiring firms to have and publish a firm-wide D&I strategy, with expectations on the role of risk and control functions in supporting the strategy
  • The largest firms would be required to set their own diversity targets where they identify underrepresentation, subject to a minimum of targets for women and ethnicity
  • Firms would have to publish a strategy promoting D&I on the board
  • An expectation that responsibility for D&I would be allocated to the relevant senior management functions, with this reflected in Statements of Responsibilities and measures for accountability to be put into place
  • Clarifying that objective findings of patterns of behaviour (such as bullying, discrimination and harassment) can be considered part of fitness and propriety assessments
  • Firms would have to monitor D&I internally and take suitable action where necessary
  • The largest firms would have to report certain D&I data, along with information on targets they have set themselves
  • Larger firms would have to disclose information on their targets, the demographic diversity of their organisation and the outcome of inclusion surveys

Transparency of data to the market

The PRA and FCA plan to use the D&I data provided by firms to produce an industry-wide benchmarking report, which will be extremely useful to see where individual organisations stand in comparison with their competitors. The ability of the PRA and FCA to effectively "name and shame" those languishing at the bottom of these reports should create the impetus to increase standards, where efforts to encourage firms to do so voluntarily have to date been slow and ineffective.

Next steps

Both consultations close on 18 December 2023. The regulators will then review the feedback and will develop final rules in 2024, which are expected to come into force 12 months after they are published, to give firms time to improve existing policies and implement new processes.


The events in the Macken case took place between 2013 and 2017 and one would hope they would be less likely to occur now, as financial institutions take their responsibilities to employees more seriously as a result of the growing importance of ESG initiatives at board level. Clearly, as with a number of other sectors, a significant culture change in the financial services sector is still required. If the "teeth" evidenced in the consultation papers survive to the final draft legislation, then the FCA and the PRA may well have produced just the right tools to propel this change into reality.