The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have scrapped proposed diversity, equity, and inclusion (DEI) rules for UK financial firms, citing concerns about regulatory duplication and unnecessary burdens on businesses.
"We continue to think that an appropriate focus on diversity and inclusion in the culture of the firms we regulate can deliver improved internal governance, decision-making and risk management," PRA CEO Sam Woods wrote in a letter to House of Commons Treasury Committee chair Dame Meg Hillier. However, he acknowledged that adding "significant new requirements in this area could be seen as in tension" with the government’s broader efforts to cut red tape and stimulate economic growth.
The proposed rules, introduced in 2023, would have required firms to develop DEI strategies, collect and report diversity data, and set representation targets. The regulators also sought to enforce action against workplace misconduct, including bullying and harassment.
Instead, the FCA and PRA will now allow the government to take the lead on new diversity legislation. As part of the announcement, the FCA also delayed its review of "non-financial misconduct," which examines when behavior outside of finance affects an employee’s "fitness and propriety." Originally expected in early 2025, the watchdog will publish its next steps in June.
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