Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA), spoke of the benefits to firms of embracing diversity when he spoke at a Wealth of Diversity Conference hosted by the Personal Investment Management and Financial Advice Association (PIMFA).
Mr Bailey also expanded his speech to include a number of related themes, and he began by commenting that the actions of both the FCA and the firms it supervises were dependent on the way wider society operates. Here, he commented:
“None of us are independent of the society in which we live and work, and its norms. The FCA is a public interest organisation, and we serve society according to objectives given to us by Parliament, and likewise Parliament defines a perimeter inside which sit the activities we regulate. Firms too serve the public, shaped by laws and customs, and in the case of a regulated industry by the regulator’s rules and the principles that shape those rules.”
Next, he listed some recent changes in society, which firms may need to adapt to:
- The transfer of responsibility to individuals from employers and the state, especially with regard to the pension freedoms and the increased choices this provides to consumers
- Greater concern for the challenges faced by vulnerable consumers
- Increased changes in the different financial challenges being faced by different generations, such as the difficulties younger people face with issues such as student debt and saving for a house deposit
- The unrelenting pace of technological change, and how this affects the way in which financial services are delivered
- The lack of respect for once trusted institutions
- The fact that consumers’ personal information has become more of a commodity, which has both advantages and disadvantages
The FCA chief then turned his attention to culture and governance. He said it was impossible for the FCA to make prescriptive rules concerning the culture of firms, but that nonetheless a poor corporate culture can lead to significant conduct failings, for which the FCA needs to take enforcement action. Introducing the idea of greater individual responsibility, he commented:
“The SM&CR is intended to identify individual responsibility – not at the expense of collective responsibility but alongside it – and increase individual accountability, not least as a contributor to stronger culture and governance.”
Mr Bailey added that the FCA looks closely at the outputs, or the results of a firm’s corporate culture, and whether consumer harm is occurring as a result.
Returning to the diversity theme, he suggested that “fostering an inclusive and diverse culture can contribute to changing the behaviour of firms for the better” in introducing different outlooks and points of view, which should hopefully help firms to do things better.
He added that the FCA has set targets regarding the representation of women and of members if Black, Asian and Minority Ethnic (BAME) groups at senior levels within the regulator. At present, 39% of the FCA’s senior leaders are women, and the aim is to increase this to 45% by 2020 and 50% by 2025. For BAME individuals, the equivalent figures are 5%, 8% and 13%.
Mr Bailey commented that the FCA was a joint winner of the Women in Finance Employer of the Year Award, which is presented to “organisations that have proactively cultivated an inclusive and diverse workforce.” However, he did acknowledge that the FCA’s median gender pay gap had increased from 2017 to 2018.
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