Regulation of culture in financial institutions: global trends and challenges

Around the world, regulators have become increasingly concerned about culture in financial services firms, as part of a wider focus on ESG issues. In the UK, the FCA and PRA recently published highly anticipated consultation papers on diversity and inclusion (D&I) in financial services, in which they propose to introduce new reporting, disclosure and target-setting requirements for regulated firms, as well as strengthen their expectations around non-financial misconduct. Culture is also an important issue in Europe, where EU regulators have made it clear, for example, that D&I is a core factor when assessing the collective suitability of banks’ management. 

While US banking regulators have yet to impose similar requirements, diversity quotas at state level for publicly traded companies and Nasdaq board diversity rules, which were recently upheld by the US Court of Appeals, have an impact on financial institutions, and the SEC may consider the introduction of enhanced diversity disclosure requirements next year. On the other hand, the Supreme Court’s recent ruling on affirmative action in higher education has cast a shadow over even private sector D&I initiatives. Even in the absence of a specific regulatory framework, however, financial institutions still need to take steps to minimise the risk of workplace misconduct and be prepared to handle grievances when they arise. 

On Thursday 7 December 2023, a panel of Freshfields lawyers from the UK, Germany and the US participated in a live webinar in which they discussed these and other issues related to the regulatory focus on culture in financial services firms. Elisabeth Øverland from the financial regulatory team in the Freshfields London office and Holly Insley from the people and reward team began with an overview of the FCA and PRA’s proposals on D&I and non-financial misconduct, after which Falko Glasow from the Frankfurt office spoke about D&I requirements for financial institutions in the EU. Jennifer Loeb, a litigator from the Freshfields office in Washington, DC, finished with an overview of what is happening in the US and what financial institutions should do to manage the risk of workplace misconduct and how to respond when allegations arise. The webinar closed with a Q&A featuring questions from the live audience.

To access a recording of this webinar, please click here.

This is the second in a series of live webinars that Freshfields will be presenting over the coming months on global trends in financial services and regulation, featuring lawyers from different regions to give an international perspective on the various topics. Information on the next webinar will be available in due course.