Financial services companies could be forced to set targets for the number of senior women they employ and publish diversity policies under proposals outlined by City regulators.
The Prudential Regulation Authority, which regulates major banks, building societies and insurance companies, has included the proposal as part of an extensive consultation on implementing an EU directive more usually associated with capping bonuses and requiring banks to raise more capital to plug shortfalls on their balance sheets.
The PRA said firms and their nomination committees should "put in place a policy promoting diversity on the management body; the nomination committee must also establish a target for gender representation on the management body". "This is intended to improve diversity within firms' management bodies," the PRA said.
Linda Jones, an employment partner at Pinsent Masons, said it would be the first time a regulatory gender requirement had been imposed in the UK.
The biggest banks and insurance companies listed on the stock market are already required to comply with the voluntary quotas set out by Lord Davies for 25% of a board of directors to be female by 2015.
But Jones said that as a result of the EU directive, if the financial firms did nothing they "would be in breach of regulation". There are no specific sanctions attached to the failure to comply with the potential regulation, although the regulator can force firms to meet its rules.
"The regulations will not prescribe what the targets should be, but they will have to be published and businesses will no doubt be wary of publishing targets that seem too lacking in ambition," Jones said. "While the requirement only applies to financial institutions at the moment, it may be a taste of things to come for other large businesses," she said.
She said the gender targets only apply to larger institutions but that all financial institutions regulated by the PRA and the Financial Conduct Authority, the other City regulator, will be required to publish a diversity policy which sets out how they propose to promote diversity in the boardroom.
"These proposals, which emanate from an EU directive, represent a step change for financial institutions," Jones said.
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