The UK’s top financial regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), have abandoned plans to introduce new diversity and inclusion requirements for financial firms, citing concerns over regulatory burdens and costs. Instead, they will support voluntary industry-led initiatives to improve representation in the sector.
The decision aligns with a broader trend of scaling back diversity, equity, and inclusion (DEI) policies, particularly in the US, where several major corporations have rolled back such initiatives following executive orders by Donald Trump. In the UK, the move reflects the government’s push to reduce regulation to stimulate economic growth.
Sam Woods, deputy governor of the Bank of England and head of the PRA, outlined the decision in a letter to the Treasury Committee, chaired by Meg Hillier. Woods stated that while diversity and inclusion could improve governance, decision-making, and risk management, the regulators would remain “alert to the risks of groupthink” within their existing supervisory framework rather than imposing additional reporting requirements.
The decision follows a Treasury Committee inquiry into sexism and misogyny in the financial sector, which revisited a 2018 investigation into gender inequality. The inquiry, prompted by allegations of sexual harassment in the industry, examined issues such as the gender pay gap, workplace culture, and barriers faced by women in finance. A March 2024 report found little progress in addressing these concerns, though it welcomed plans to strengthen non-financial misconduct rules.
Woods explained that financial firms had resisted additional diversity reporting requirements, particularly given the government’s separate plans for new legal reporting obligations. He emphasised that regulators were focusing on reducing burdens on firms while still fulfilling their objectives.
The regulators also confirmed they would not revisit the question of diversity and inclusion rules until after the implementation of any new government legislation in this area.
Separately, the Bank of England has offered staff a 3% pay rise for 2025-26, in line with current inflation but lower than the previous year’s increase. The deal, reported by Bloomberg, was attributed to budget constraints, though a majority of Unite union members have backed the proposal. The central bank faces ongoing pressure to retain talent while managing costs, amid criticism of Governor Andrew Bailey’s previous comments urging restraint in wage demands to curb inflation.
