Sexism in the City Report paints bleak picture of culture and lack of progress in Financial Services Sector

The highly anticipated Treasury Select Committee's Sexism in the City Report, released on 8th March International Women’s Day 2024, paints a damning picture of sexism in the UK financial services industry and highlights the stark lack of progress made.

The inquiry intended to follow up on the 2018 Women in Finance inquiry, assess progress since, and explore how barriers to women in the financial services industry could be mitigated.

The Report suggests that despite incremental progress since 2018, such as a slight increase in women in senior roles, the overall impact and pace of change has been highly disappointing, especially in relation to levels of sexual harassment, bullying and sexual misconduct.

The Report repeatedly emphasised a “[s]ignificant concern […] about the overall culture prevalent within the sector that holds back progress for women”, noting that whilst women face challenges in relation to pay, harassment or maternity leave, it is ultimately a pervasive “cultural deficit” within the financial services sector which allows them to persist.

The Committee attributed the failure of firms to recognise the value of improving Diversity and Inclusion and consider it a core business priority to impeding progress; the inquiry heard some firm diversity and inclusion initiatives described as “box-ticking” or “virtue-signalling” exercises.

Whilst the Report recognised the contributory work of the FCA and PRA, it expressed concern surrounding their proposals to implement diversity and inclusion strategies, targets, and increased data collection.

The Committee suggested that this could cause firms to focus on demonstrating diversity and inclusion on a quantitative, surface level, instead of making the important cultural changes required to remove barriers for women. Attendees noted that appointments of women to senior positions could be seen as ‘positive discrimination’ or ‘tokenistic’ as firms strive to meet targets.

It was also noted that requirements proposed by the FCA and PRA would be costly for firms to implement, have unclear benefits, and would fail to capture smaller firms which have some of the lowest levels of D&I and, in some cases, the most problematic cultures.

The Report recommended that, alternatively, the FCA focus on ensuring firm boards and senior leadership take responsibility for driving diversity and inclusion forward. This formed part of a wider reiteration in the Report that fundamental cultural change cannot be achieved unless firms take accountability at all levels.

In emphasising that firms should recognise the value of driving D&I, the report frequently pointed to the evidential link between diversity and inclusion and business performance, warning that firms who fail to cultivate an inclusive and diverse workplace will “suffer […] reduced competitiveness and profitability”.

It was also noted that some, particularly men, in the industry are unable to recognise the ‘softer end’ of misconduct such as subtle symptoms of sexism, misogyny and microaggressions, and increased unconscious bias and active bystander training could aid firms in cultivating allies who are equipped to challenge problematic behaviours.

Perhaps the most damning element of the Report was the recognition that the problematic culture in the sector, described by witnesses as an ‘old boys club’, had enabled a high prevalence of harassment, bullying and serious non-financial misconduct, perpetuated by poor handling of allegations in the sector.

The inquiry heard that often allegations are not taken seriously or investigated adequately, and that NDAs (non-disclosure agreements) are frequently used to shield the reputation of firms and senior leaders in harassment cases, in effect, silencing victims and protecting perpetrators.

Furthermore, the Report found that misconduct has been enabled by ineffectual whistleblowing processes within firms which fail to protect those reporting harassment, discourage transparency and prevent the development of psychologically safe working environments where women feel able to report misconduct.

The FCA’s September 2023 D&I consultation paper proposed to further embed considerations of non-financial misconduct in fitness and propriety assessments, conduct rules and the criteria for firms to operate within the sector. It proposed to mandate firms to inform the regulator when disciplinary action is taken against an individual for non-financial misconduct.

Although participants praised the FCA’s increased focus on non-financial misconduct, several witnesses called on the regulator to ensure fitness and propriety tests more overtly capture non-financial misconduct and provide additional guidance on how firms should deal with non-financial misconduct. Many respondents also called for the FCA to compel firms to report data on the use of NDAs.

The Report highlighted the limited awareness of the FCA’s whistleblowing line and how it operates and recommended that the regulator launch an awareness campaign to publicise its availability, function, and clarify that an NDA does not prevent individuals from reporting harassment to the FCA.

FCA Response?

In response to the Report, the FCA published a web page linking the Report to its consultation aimed at boosting diversity and inclusion in the financial services sector.

The FCA acknowledged that “there are pockets where no progress is discernible and significant cultural issues remain” in the financial services sector and concurred with the Report that change is needed, and that greater diversity and inclusion within firms can increase performance and “deliver improved internal governance, decision making and risk management”. It also confirmed it will call on firm boards and senior leadership to take greater responsibility for delivering change.

The regulator referred to its consultation to boost D&I in firms and pledged to heighten expectations on firms to tackle non-financial misconduct and encourage regulated firms to embed friendly policies with equality impact assessments. The statement also pledges to carefully consider all the Committee’s feedback and recommendations.

However, the FCA noted that its starting point for the D&I consultation was “what gets measured gets done, and transparent comparable data would benefit firms, employees and the wider economy”, echoing its aim to become a data-driven regulator.

It is therefore unclear how the FCA will mitigate the concerns raised during the inquiry that attempting to drive diversity and inclusion through targets and data collection could fail to tackle the root culture issue and achieve progress. As Mark Freed, Managing Director of Men for Inclusion told the inquiry, “a lot of […] focus has been on diversity and counting the number of women in an organisation, rather than on inclusion. We need to start focusing on inclusion, because we need to change the culture”.

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