The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) (together the Regulators) have confirmed that they would not be proceeding with their proposed measures aimed at enhancing/addressing diversity and inclusion (D&I) within the firms that they regulate. Alongside this decision, the FCA confirmed its ongoing commitment to addressing non-financial misconduct in firms.
The key reasons behind the Regulators’ decision are as follows:
- Diverse feedback: the Regulators received a wide range of responses, including strong concerns from the Treasury Select Committee regarding the proposed reporting requirements.
- Legislative developments: anticipated changes in legislation, such as those related to gender action plans and disability and ethnicity pay gap reporting, mean there may have been some duplication and unnecessary costs associated with separate requirements set by the Regulators.
- Avoiding excessive regulatory burdens: the Regulators recognised that adding significant new D&I requirements could conflict with their broader efforts to reduce regulatory burdens.
Both the FCA and the PRA reaffirmed their support for voluntary, industry-led initiatives aimed at improving D&I. They may revisit the possibility of putting in place additional regulatory requirements after firms have fully implemented any new relevant legislation.
Alongside this announcement on D&I proposals, the Regulators outlined their ongoing priorities and planned reviews:
- The FCA remains committed to tackling non-financial misconduct within firms, with plans to align its approach with any upcoming legislation and provide an update on next steps by June 2025.
- The Regulators expect to conduct a review of the impact of removing the bonus cap on gender pay and inequality in the 2026/27 financial year, allowing firms time to implement changes.
The Regulators’ decision reflects a balance between regulatory considerations and industry feedback. Their ongoing focus on non-financial misconduct and planned reviews demonstrates a continued commitment to fostering accountability and fairness within financial firms.
