The measures aim to enhance the safety and soundness of firms and improve their understanding of diverse consumer needs, as increased diversity and inclusion can deliver better internal governance, decision-making and risk management.

The proposals include rules and guidance to make clear that misconduct, such as bullying and sexual harassment, poses a risk to healthy firm culture

This consultation builds on the July 2021 discussion paper in which the UK regulators demanded better data collection on the diversity of regulated firms, and made clear they want to improve transparency on some or all of the nine protected characteristics defined in the Equality Act 2010 – as well as socio-economic background.

The responses to the discussion paper were broadly positive, with most respondents endorsing regulatory action.

The consultation’s proposals set “flexible, proportionate minimum standards to raise the bar”, placing more requirements on larger firms, according to a statement. Some measures include requiring firms to develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals; collecting, reporting and disclosing data in addition to setting targets to address under-representation.

“Diversity and inclusion play an important role in guarding against groupthink within firms. Firms in which a broad range of perspectives is welcomed and encouraged will manage their risks better, advancing the PRA’s objective of safety and soundness,” said PRA CEO Sam Woods.

He added, “Stronger diversity and inclusiveness should also make firms more competitive by enabling them to attract a wider pool of talent.

“We are tabling proposals today which we think will advance our objectives, alongside existing core parts of our regime such as capital and liquidity requirements, and we welcome views on them from all stakeholders.”

The consultation period is open until 18 December 2023, with the regulators welcoming input to help develop final rules ahead of publication in 2024.

Government work and voluntary initiatives have already made some progress, including projects such as the Treasury’s Women in Finance Charter, which found that average senior female representation across signatories had increased to 35% in 2022, up from 33% in 2020 and 2021, and 71% of signatories have increased their proportion of women in senior management.

However, Aviva group CEO Amanda Blanc said that while improved female representation in finance is “encouraging”, lasting change will take more work.

In July, Lloyd’s released figures revealing that only 17 of the 56 Lloyd’s managing agencies and only one in four brokers are meeting or exceeding the Corporation’s 35% female leadership target.

It is also important to note, as we did in our August 2022 investigation, that Lloyd’s defines leadership roles as roles on boards and executive committees, and direct reports to the executive committee.

As we have previously reported though, when focusing on executive directorships only, the picture is bleaker. As of last summer, only 10% of executive roles at managing agencies were occupied by women, compared to 42% of the total market workforce – and it is unlikely that this figure has moved far in the past year.