In response to the perception that the financial services industry lacks diversity in its workforce, the Dodd-Frank Wall Street Reform and Consumer Protection Act included section 342. This section requires each of the financial regulators to establish an office of minority and women inclusion (OMWI) and for that office to develop standards for assessing the diversity policies and practices of the entities regulated by each agency. To ease application, the agencies worked together to develop joint standards. The joint standards are intended to provide a framework for an entity to create and strengthen diversity policies and practices. The agencies include the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.
The policy applies to any entity regulated by one of the agencies involved. This includes the vast majority of financial institutions.
Legal Effect of the Policy
The policy does not create new legal obligations. The use of the standards is voluntary, and the agencies are not to use their examination or supervisory processes in connection with the standards.
Section 342(b)(4) of the Dodd-Frank Act states that the directive to develop standards may not be construed to mandate any requirement on or otherwise affect the lending policies and practices of any regulated entity, or to require any specific action based on the findings of the assessment.
However, the standards are likely to become a "best-practices" example. Comparing them to an institution's current practices, which may already conform with the standards, is encouraged.
Definitions within the Policy
After public comment, the agencies defined "diversity" and "inclusion" as follows:
- Diversity: minorities and women; with minorities defined as including Black Americans, Native Americans, Hispanic Americans and Asian Americans. Defined in reference to section 342(g)(3) of the Dodd-Frank Act.
- Inclusion: a process to create and maintain a positive work environment that values individual similarities and differences, so that all can reach their potential and maximize their contributions to an organization.
Summary of the Policy
The policy addresses five primary areas, describing ideal behavior and then articulating the suggested standards:
- Organizational Commitment to Diversity and Inclusion: The standards advise considering diversity and inclusion in employment decisions, including both recruiting and hiring. The standards focus on the board or senior officials, suggesting a "diversity officer" or similar position and regular progress reports on diversity and inclusion. Training on diversity and inclusion is also suggested.
- Workforce Profile and Employment Practices: The standards encourage compliance with laws and outreach in order to create a diverse applicant pool. The standards suggest that entities use quantitative and qualitative means to measure their workforce’s diversity and inclusion.
- Procurement and Business Practices—Supplier Diversity: The standards suggest a policy that provides fair opportunities for minority- and women-owned businesses to compete to be suppliers, the use of metrics to evaluate supplier diversity, and outreach to encourage further diversity.
- Practices to Promote Transparency of Organizational Diversity and Inclusion: The standards encourage annual publication of information including, the entity's strategic plan for diversity and inclusion, the entity's policy on diversity and inclusion, the entity's progress towards diversity and inclusion, and opportunities that promote diversity. Such information could be published on a website or through any other appropriate means.
- Entities' Self-Assessment: The standards encourage ongoing monitoring and evaluation of performance, with results to be provided to the OMWI director of the entity’s primary federal financial regulator and the public. The agencies are then permitted to use this information to monitor trends in the industry, and can publish it in anonymous form. The financial regulatory agencies will share information with other agencies when deemed appropriate.