Diversity and Inclusion: Federal Financial Regulatory Agencies Issue Final Statement on Assessment of Diversity & Inclusion Practices at Regulated Entities

On June 10, 2015, the federal financial agencies issued a final inter-agency policy statement establishing joint standards for assessing the diversity practices and practices regulated by the agencies. See 80 Fed. Reg. 33016 (June 10, 2015), effective on the date of publication (the agencies are soliciting comments on the collection of information). These standards were established by section 324 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (12 U.S.C. section 5452).

The federal financial agencies are the following–the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Bureau of Consumer Financial Protection, and the Securities and Exchange Commission. Congressional Democrats requested that these agencies submit internal agency assessments of diversity and inclusion.

Federal Financial Agency Report Number Internet Link Comment
Consumer Financial Protection Bureau Audit report 2015-MO-C-002 http://oig.federalreserve.gov/reports/cfpb-diversity-inclusion-mar2015.pdf American Banker article about racial disparities of CFPB staff evaluations.
Department of the Treasury, Office of the Comptroller of the Currency OIG-15-017 http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-15-017.pdf
Federal Deposit Insurance Corporation Eval-15-001 http://www.fdicoig.gov/reports15/15-001EV.pdf
Federal Housing Finance Agency EVL-2015-003 http://fhfaoig.gov/Content/Files/EVL-2015-003.pdf
Federal Reserve Board Audit report 2015-MO-B-006 http://oig.federalreserve.gov/reports/board-diversity-inclusion-mar2015.pdf What is left out of the report is significant: Artis v. Bernanke (now Yellen). Also 12 U.S.C. 244 needs Congressional attention to ensure that Title 5 of the U.S. Code applies to the Board; the Board’s record-keeping on, and reporting of, its internal management is lax.
National Credit Union Administration OIG-14-09 http://www.ncua.gov/about/Leadership/CO/OIG/Documents/OIG201409EqualOpportunityDiversity.pdf Click for blog post on this report
Securities and Exchange Commission 528 http://www.sec.gov/oig/reportspubs/528.pdf Report is thorough, thoughtful, and well done.

Because several of the financial agencies have spotty records in diversity and inclusion, it is curious to see this final statement being published for the financial services industry, which may have similar problems. Nevertheless, it is important to have the standards published and the information recorded and published for public review. Oversight of the data that are submitted is essential, given the results from the federal financial regulatory agencies. [For example, it is interesting to see the resistance to diversity and inclusion data collection by the Board’s response through Don Hammond, chief operating officer for the Board. The Board’s history on diversity and inclusion gives an observer pause, and improvement of the Board’s compliance on these issues is expected and necessary.]

In reading the preamble of the final statement, some commentators stated that the then-proposed standards amounted to “quotas” or an additional compliance burden. However, without the data being collected, there are structural problems facing minorities and women in the financial services industry as well in other areas of the society in the United States.

Without these persistent issues, these commentators would have a point. But since the issues still exist in society, within the financial services sector (with existing practices before June 10, 2015), and especially within the federal financial regulatory agencies, data are needed for study. The mere collection and publication of data imposes no requirements for hiring goals; rather, the collection of data only reflects the practices of the collecting organization, which should be confident that its practices are fair and equitable and that that confidence should be demonstrated in its data.