Britain’s top financial regulators have scrapped proposed new rules to boost diversity and inclusion in the industry, and mothballed a fresh crackdown on non-financial misconduct, citing fears of imposing unnecessary regulatory burdens on firms.
The Prudential Regulation Authority and Financial Conduct Authority said on Wednesday they had no plans to follow a joint consultation with further regulation, in light of industry feedback and already pending changes to the law.
Sam Woods, CEO of the PRA, said his organization still believed an “appropriate focus” on D&I could benefit governance, decision-making and risk management across the sector but new requirements “could be seen as in tension” with efforts to support competitiveness by reducing red tape on firms.
Britain is moving at pace to lighten the regulatory load on its financial services industry, a critical cog in a sluggish UK economy. But some stakeholders fear the moves, which include disbanding of certain regulators and a reduction in banks’ capital requirements, could endanger the sector in the long run.
The latest position updates from the PRA and FCA follow a massive backlash against diversity, equity and inclusion initiatives in the United States during the first weeks of President Donald Trump’s second term in office.
On Inauguration Day, Trump launched executive orders revoking a slew of liberal policies including support for the rights of the disabled, low-income or social and ethnic minorities.
Several Wall Street firms have also softened their stances on DEI, sparking concerns among staffers who fear a future increase in workplace discrimination, bias and inequality.
“Developments across the pond and the repeated push back on publishing final rules by the FCA and PRA mean today’s statement does not come as a surprise at all,” Noline Matemera, partner at law firm Osborne Clarke LLP, told Reuters.
“Whether (it) is the death knell for focusing on D&I in financial services in the UK is yet to be seen.”
‘Name and Shame’
The FCA said separately it would axe proposals to use a “public interest” test for announcing investigations into regulated firms, part of a drive to enhance transparency of its enforcement activities and deter wrongdoing.
Lawmakers strongly criticized the suggested change in a report entitled “Naming and shaming: how not to regulate,” and called on the watchdog to ditch the plans entirely.
But the FCA said it had observed significant support for reactively confirming investigations already in the public domain and for notifying the public about potentially unlawful activities of unregulated firms as well as regulated firms which were seen operating outside the regulatory perimeter.
The watchdog said it would also look to publish greater detail of matters under investigation on an anonymous basis, with final policy to be announced by end-June.
“Considerable concerns remain about our proposal to change the way we publicize investigations into regulated firms, so we will stick to publicizing in exceptional circumstances as we do today,” Nikhil Rathi, chief executive officer of the FCA, said.
(Reporting By Sinead Cruise; editing by Kirsten Donovan)
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