Zarah ChoudharyThe Bank of England’s Prudential Regulation Authority (PRA) has decided not to introduce new diversity and inclusion rules for financial firms, citing concerns over regulatory burdens and ongoing legislative developments.
In a letter to Dame Meg Hillier, chair of the Treasury Committee, Sam Woods, the PRA’s deputy governor, confirmed that while the regulator remains committed to fostering diversity, it will not move forward with formal rulemaking at this time.
The decision follows feedback from a joint consultation with the Financial Conduct Authority (FCA) in 2023, which revealed industry concerns over potential duplication and costs associated with additional reporting requirements.
The letter acknowledged that diversity in financial services can improve governance, decision-making, and risk management.
However, Woods stated that the PRA aims to balance these benefits against the need to reduce regulatory pressures on firms.
Instead of imposing new requirements, the regulator will support voluntary industry initiatives and continue to monitor risks related to groupthink through existing supervisory practices.
The FCA has reached the same conclusion, with its CEO, Nikhil Rathi, communicating this in a separate letter to the committee.
Woods also addressed concerns over gender pay inequality linked to the removal of the bankers’ bonus cap.
The PRA and FCA intend to review the impact of this policy change, but the process will not begin until at least the 2026/27 financial year, allowing time for firms to adjust their remuneration structures.
Woods said: “Given this, 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.”
Dan James Smith, co-chair of Business Forum, commented: “The Financial Conduct Authority and Prudential Regulation Authority were arguably going beyond both their remit and expertise in seeking to impose rules different from existing equality law.
“As SEEN in the City highlighted in 2024, there was no requirement in these proposals for regulated firms to collect data on sex.
“Rather firms would have been able to decide if they would like to collect data on sex or ‘gender’, thereby creating poor quality data in relation to the protected characteristic of sex.
“Many banks and insurers that would have come under the scope of the FCA and PRA proposed D&I rules already conflate sex with ‘gender’ or ‘gender identity’ thereby confusing the data on women in the sector.
“Without accurate data collection in relation to sex, there is no solid foundation for subsequent data collection on same-sex attracted LGB people.”
He added: “We encourage the HR departments of all firms to ensure the protected characteristic of sex is captured accurately in their data collection.”
