Diversity and inclusion – embracing the true colours in financial supervision

FSI Insights  |  No 42  | 
24 May 2022

Sound diversity and inclusion (D&I) practices by financial institutions can support the core prudential objective of promoting safety and soundness of the financial sector. D&I can improve the quality of corporate governance of regulated financial institutions and promote fair and equitable treatment of customers, thus contributing to the mitigation of reputational and legal risks.

This paper examines emerging regulatory approaches on D&I practices of financial institutions. It finds that there has been noticeable progress in improving firms' D&I practices internally within their organisations as well as externally in dealings with customers. Regulatory approaches on D&I cover requirements or guidance on diversity of decision-makers within firms so as to promote sound business strategies as well as broader social justice policies aimed at inclusion of underrepresented groups of the population in the workforce and as financial consumers.

D&I regulatory approaches on corporate governance, conduct of business and disclosure vary across jurisdictions. Most of the progress thus far has focused on gender diversity. Against this background, international standards and guidance on D&I might be helpful to accelerate the pace of progress, broaden the scope beyond gender and, more generally, enhance the safety and soundness of firms and the financial sector.

JEL classification: G20, G28, G30, G38

Keywords: corporate governance, conduct of business, disclosure, diversity and inclusion

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