In a review published today (December 12) into diversity and inclusion strategies within financial services companies, the regulator said it found several instances where firms focused almost exclusively on gender representation at senior levels because there were external targets and expectations for it.
This, the FCA said, suggested some financial services companies were taking a "compliance approach" to diversity and inclusion rather than being genuinely committed to it.
The FCA said: "Such focus, in isolation, risks creating a culture where firms attempt to 'poach' diverse senior talent rather than develop their own pipelines. This is not a sustainable approach and is unlikely to bring meaningful, long-lasting change."
This, the FCA warned, meant firms risked "cannibalising each other" as they hunted diverse senior talent.
Indeed the regulator pointed to data which showed the biggest drop-off in representation is from junior to middle management grades.
“We want to see an inclusive industry where the most capable people are able to progress, no matter what their background, and where diversity of thought is valued,” the FCA wrote.
It emphasised that diversity and inclusion, founded on a culture where it was safe to speak up, was essential for firms to have “healthy cultures that help to deliver consumer protection and market integrity” and said that, although there had been progress in recent years, more needed to be done.
The regulator found large gender pay gaps persisted across the financial services sector with "little sign" that action to close these had yet been effective.
The FCA found the firms it spoke to were most focused on addressing gender representation, with ethnicity starting to receive more attention. Other demographic characteristics received much less attention.
The regulator gathered data from a sample of 12 firms across multiple sectors, which included a 90-minute structured interview with each firm.
Firms were selected based on their gender pay gap, with eight firms having a large gap and four with relatively smaller ones.
The results showed what the FCA described as a “surprising degree of consistency” among the firms it spoke to.
All were early in the development of their approach to diversity and inclusion, typically having started serious efforts in 2019 or 2020.
Despite noting that “almost all” of the people the regulator spoke to were committed and passionate about making progress, it said many firms’ strategies were “generic and did not take a holistic view”.
“Very few firms seemed to have understood diversity and inclusion as a fundamental culture issue,” it said.