UK watchdogs abandon diversity work after backlash from bankers
12 Mar 2025, 08:28 pm
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(March 12): Top UK regulators abandoned proposals to boost diversity across financial firms as they lean into the Labour government’s attempts to stoke economic growth by cutting red tape.

A year and a half after announcing it was considering proposals that would require banks to make mandatory disclosures about the diversity of their ranks and set new targets to address under representation, the Prudential Regulatory Authority and Financial Conduct Authority said they had “no plans to take the work further”.

“We do not currently plan to publish new rules on diversity and inclusion, and do not intend to return to this question until after the substantive implementation of any new legislation in this area,” Sam Woods, CEO of the PRA, said in a letter to parliament. “In the meantime, we will continue to support voluntary industry initiatives.”

The move came just hours after the UK government announced plans to axe the country’s Payments Systems Regulator. Separately, the FCA also said Wednesday it would ditch a controversial plan to “name and shame” the companies it is investigating after the proposal sparked backlash from the banking industry and lawmakers alike.

Taken together, the moves are the clearest signs yet that Prime Minister Keir Starmer and Chancellor Rachel Reeves intend to make good on their vow to deregulate their way to growth. It’s been a sharp reversal for their Labour party, which for decades was the political party that favoured taming the City of London.

“There is a very clear steer from all regulators on growth,” FCA chief Nikhil Rathi told reporters on a conference call, though he insisted the UK’s regulators could still “walk the line” of giving the government what they want while safeguarding consumers and financial stability.

DEI backlash

The PRA and FCA’s decision to abandon the diversity initiative comes as US banks have been walking back their own efforts to improve equity across their ranks.

Citigroup CEO Jane Fraser announced last month she was abandoning the diversity goals she set out less than three years ago, citing an executive order by President Donald Trump that banned “illegal DEI” policies by federal contractors like her bank. JPMorgan Chase & Co’s Jamie Dimon has labelled some DEI programmes a waste of money.

The PRA and the FCA did not mention Trump’s moves in their own explanations for why they’re ditching the initiative. Instead, they noted that the UK government elected last summer has promised legislation that might overlap with the regulators’ initiatives on this front.

“There is also a growing emphasis in our work on reducing regulatory burdens on firms while still delivering our objectives,” Woods said in his letter. “Adding significant new requirements in this area could be seen as in tension with that approach.”

As part of the announcement, the FCA said it would need more time to complete its work on “non-financial misconduct,” which sought to spell out when conduct that was not related to finance could be relevant to whether a worker was "fit and proper" for their job. The watchdog will now set out its next steps in June, which is later than the “early 2025” it originally promised.

The regulator’s decision to abandon its “name and shame” plans highlights the power of the UK banking industry’s relentless lobbying campaign against the measure.

The FCA ultimately received more than 100 responses to the proposal and lobbying groups like TheCityUK warned the move would hurt the UK’s reputation as a global financial hub. Even former Chancellor of the Exchequer Jeremy Hunt made a rare political intervention against the regulator over the matter.

“While consumer and whistleblowing groups generally supported greater transparency, industry remains largely opposed to certain aspects,” Rathi wrote in a separate letter to parliament. “Given the lack of consensus, we will not proceed with this and will therefore stick to our existing exceptional circumstances test to determine if we should publicise investigations into regulated firms.”

Normally, the watchdog only identifies the companies that it is scrutinising once it has completed its investigation and decided to impose a penalty. But the FCA had come up with the plan to name those entities at an earlier stage to encourage witnesses to come forward and to improve transparency and deterrence.

Rathi, who stressed that the FCA has improved its enforcement track record more generally, said he was “not commenting on speculation” about what backing down from some of his most flagship initiatives meant for his future at the FCA, where his five-year term is up for renewal in September.

Uploaded by Arion Yeow

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