A coalition of federal agencies regulating the financial services industry recently issued final regulations regarding diversity policies and practices. The regulations were required by the Dodd-Frank Act and were originally proposed by the agencies in October 2013. The guidelines are intended to assist the agencies in assessing the diversity policies and practices of regulated financial institutions.
The final document—“Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies”—define bank obligations to satisfy the new standards as follows:
“This document is a general statement of policy under the Administrative Procedure Act ... It does not create new legal obligations. The use of the Standards by a regulated entity is voluntary. The agencies will not use their examination or supervisory processes in connection with these Standards.”
Therefore, the final regulations are advisory, and are not legal obligations which apply to regulated institutions.
The policy statement consists of a framework and specific actions which the agencies believe will result in effective diversity policies for the banking industry. The agencies formulated their views after gathering information from resources the agencies viewed as experts in the area of diversity and inclusion.
We see significant overlap between this policy statement and actions legally required for financial institutions governed by the various affirmative action laws, regulations, and executive orders. The new policy statement goes beyond affirmative action obligations, particularly when it comes to relationships with minority-owned or female-owned vendors.
Below I’ve incorporated an outline of the diversity actions contemplated by the guidelines that you should review with your Human Resources function.
Outline of diversity actions
Joint Standards for Assessing Diversity Policies and Practices Key Components
I. Organizational Commitment to Diversity and Inclusion
• The entity includes diversity and inclusion considerations in both employment and contracting as an important part of its strategic plan for recruiting, hiring, retention, and promotion.
• The entity has a diversity and inclusion policy that is approved and supported by senior leadership, including senior management and the board of directors.
• The entity provides regular progress reports to the board and senior management.
• The entity regularly conducts training and provides educational opportunities on equal employment opportunity and on diversity and inclusion.
• The entity has a senior level official, preferably with knowledge of and experience in diversity and inclusion policies and practices, who oversees and directs the entity's diversity and inclusion efforts.
• The entity takes proactive steps to promote a diverse pool of candidates, including women and minorities, in its hiring, recruiting, retention, and promotion, as well as in its selection of board members, senior management, and other senior leadership positions.
II. Workforce Profile and Employment Practices
• The entity implements policies and practices related to workforce diversity and inclusion in a manner that complies with all applicable laws.
• The entity ensures equal employment opportunities for all employees and applicants for employment and does not engage in unlawful employment discrimination based on gender, race, or ethnicity.
• The entity has policies and practices that create diverse applicant pools for both internal and external opportunities that may include:
• Outreach to minority and women organizations;
• Outreach to educational institutions serving significant minority and women student populations; and
• Participation in conferences, workshops, and other events to attract minorities and women and to inform them of employment and promotion opportunities.
• The entity utilizes both quantitative and qualitative measurements to assess its workforce diversity and inclusion efforts. These efforts may be reflected, for example, in applicant tracking, hiring, promotions, separations (voluntary and involuntary), career development, and retention across all levels and occupations of the entity, including the executive and managerial ranks.
• The entity holds management at all levels accountable for diversity and inclusion efforts, for example by ensuring that such efforts align with business strategies and individual performance plans.
III. Procurement and Business Practices—Supplier Diversity
• The entity has a supplier diversity policy that provides for a fair opportunity for minority-owned and women-owned businesses to compete for procurement of business goods and services. This includes contracts of all types, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the entity’s assets, and the development of the entity’s equity investments.
• The entity has methods to evaluate its supplier diversity, which may include metrics and analytics related to:
• Annual procurement spending;
• Percentage of contract dollars awarded to minority-owned and women-owned business contractors by race, ethnicity, and gender; and
• Percentage of contracts with minority-owned and women-owned business sub-contractors.
• The entity has practices to promote a diverse supplier pool, which may include:
• Outreach to minority-owned and women-owned contractors and representative organizations;
• Participation in conferences, workshops, and other events to attract minority-owned and women-owned firms and inform them of contracting opportunities; and
• An ongoing process to publicize its procurement opportunities.
IV. Practices to Promote Transparency of Organizational Diversity and Inclusion
• The entity maintains a diversity and inclusion strategic plan;
• The entity maintains a policy on its commitment to diversity and inclusion;
• The entity maintains a progress toward achieving diversity and inclusion in its workforce and procurement activities (which may include the entity’s current workforce and supplier demographic profiles); and
• Opportunities are available at the entity that promote diversity, which may include:
• Current employment and procurement opportunities;
• Forecasts of potential employment and procurement opportunities; and
• The availability and use of mentorship and developmental programs for employees and contractors.
V. Entities’ Self-Assessment
• The entity uses the Standards to conduct self-assessments of its diversity policies and practices annually.
• The entity monitors and evaluates its performance under its diversity policies and practices on an ongoing basis.
• The entity provides information pertaining to the self-assessments of its diversity policies and practices to its primary federal financial regulator.
• The entity publishes information pertaining to its efforts with respect to the Standards.