Sexism in the City report and implications for the FCA's Consultation on DE&I

March 20, 2024

Does the recent Treasury Committee ‘Sexism in the City’ Report mean its back to the drawing board for the joint regulators’ proposals to improve DE&I?



In the autumn of 2023 the FCA produced a Consultation Paper (CP23/20) which outlined its proposals to improve diversity, equality and inclusion in the financial services sector; the PRA produced a similar consultation. These proposals aim to address the issues of ‘non-financial misconduct’ that still appear to be part of the culture in financial services. Considerations put forward included integrating non-financial misconduct into HR processes (including fit and proper assessments), the FCA Conduct Rules, and Threshold Conditions. Additionally, the FCA proposed additional data collection and reporting responsibilities and the setting of diversity targets.

In July 2023 the Treasury Committee launched its inquiry into ‘Sexism in the City’, which intended to follow-up on the 2018 inquiry. It sought to explore, among other things, progress on:

  • removing barriers to women entering and having careers across the financial services industry, including on boards and in executive roles;
  • the impact of the Treasury’s ‘Women in Finance Charter’;
  • removing gender pay gaps, and combatting sexual harassment and misogyny; and
  • offering effective ways to escalate concerns about sexual harassment.

As we awaited the outcome of the government inquiry, and the FCA was no doubt sifting through responses to its Consultation Paper, it issued a non-financial misconduct questionnaire to firms in its wholesale portfolios. This requested volumes of non-financial misconduct incidents recorded (e.g. sexual harassment, bullying etc) and the method by which these incidents were detected (e.g. whistleblowing and surveillance within firms). Firms were also asked high-level questions about governance, policies/procedures and management information.

‘Sexism in the City’ report

In the summary of its introduction, the Committee reported that there have been ‘incremental improvements for women working in financial services on certain metrics, such as the proportion of women holding senior roles.

Overall, there has been a disappointing lack of progress on sexual harassment and bullying, including serious sexual misconduct. Despite the best efforts of some, far too little progress has been made and serious problems which should have been rooted out still persist. Significant concern remains, however, about the overall culture prevalent within the sector that holds back progress for women’.

Implications for the FCA’s Consultation Paper (CP23/20)

Whilst the Committee was broadly positive about the intervention by the joint regulators, it stated in the report that it had concerns about some of their proposals. It suggested that it would be costly with the benefits being ‘unclear’. Instead, they recommended that all financial services firms, irrespective of size, sign-up to the voluntary ‘Women in Finance Charter’.

Significantly, the report also recommended that ‘the regulators drop their plans for extensive data reporting and target setting’. The Committee is taking the view that the market should be able to resolve the problem without regulatory intervention. Furthermore, it believes that firms that have more diverse and inclusive cultures will prosper, ‘leaving those that perform badly in these areas to suffer the consequences for their reduced competitiveness and profitability’.

These views are not new; data from McKinsey and BlackRock details the financial advantages firms can benefit from when they have more diverse cultures. The original McKinsey Report – ‘Why Diversity Matters’ – states that ‘more diverse companies …are better able to win top talent and improve their customer orientation, employee satisfaction, and decision making, and all that leads to a virtuous cycle of increasing returns. This in turn suggests that other kinds of diversity – for example, in age, sexual orientation, and experience …are also likely to bring some level of competitive advantage for companies that can attract and retain such diverse talent.’

The ‘Sexism in the City’ report goes on to make a number of recommendations to government and regulators including improvements to maternity leave (equalising their offer of parental leave for men and women), flexible/hybrid working (encouraging firms to undertake equality impact assessments on their flexible working policies and the interaction with diversity and inclusion within their firm) and menopause strategies (establish policies and support for those who are affected to ensure that their experience and talents are not prematurely lost from the industry).


There are a number of positive recommendations in the report but suggesting a dilution in the approach by the joint regulators would appear to be a backward step. It is acknowledged that improvement in the culture of financial service firms is lagging behind the majority of other sectors so it would be my hope that the regulators don’t row-back from their proposals, and in fact decide to strengthen them.

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