Today, two leading Democratic Members of Congress are raising concerns with the release of final diversity assessment standards by six federal financial regulators, which were called for by the Dodd-Frank Wall Street Reform Act. In a joint statement Congresswoman Maxine Waters (D-CA), Ranking Member of the Financial Services Committee and chief architect of the provision, known as “Section 342” joined Congresswoman Joyce Beatty (D-OH), a leading Democrat overseeing its implementation, in expressing their deep disappointment in the structure and scope of final standards, which will be used to assess the diversity of financial services firms.
As part of the Dodd-Frank reform law, Section 342 established the Office of Women and Inclusion (OMWI) to set-up and oversee diversity initiatives and programs designed to create fair and inclusive work environments in the financial services industry, their regulators and those who receive government contracts. The lawmakers raised concerns about the ambiguity of the final rule, which reflects little-to-no meaningful adjustment from the draft released almost two years ago. In early 2014, Waters and Beatty led a group of Congressional Black Caucus Members who served on the Financial Services Committee in issuing a letter to participating federal agencies expressing their deep concerns about the draft standards. It provided extensive guidance on the methods by which agencies can leverage critical information to address diversity challenges in the financial services industry.
Their statement follows:
“We remain disappointed that, almost five years after the Dodd-Frank Act was enacted, our federal financial services agencies continue to provide lip service to important issues related to the diversity and inclusion of women and minorities in the financial services sector. In fact, the recently released final standards for assessing the diversity practices of financial institutions appear to do nothing to bring transparency to this industry, which has a long history of failing to promote diversity in its workforce.
The final rule is fraught with ambiguity, fails to make the disclosure of diversity data mandatory for financial institutions and prevents the public from easily accessing the information it was designed to provide. As we and other members of the CBC noted in 2014, this rule does not establish uniform criteria to assess workforce and supplier diversity practices and will make meaningful oversight and comparison of diversity across firms very difficult.
Section 342 gave these agencies the authority to require all regulated entities to collect and report data on workforce and supplier diversity practices. But these final rules fail to do so, and have the potential to undermine the meaningful progress Dodd-Frank made toward a more diverse financial sector.”
It is well documented that the financial services industry falls short when it comes to upward mobility and representation for minorities as well as supplier diversity in contracting. In fact, according to the 2013 Catalyst Census, women are only 17.6 percent of executive officers in the finance and insurance industries. In the securities and investment banking industries, in particular, men hold more than 80 percent of the executive positions. Congress included Section 342 in Dodd-Frank as a means of measuring levels of diversity and establishing best practices industry can use to ensure progress toward more equitable representation in the financial services sector.
The final joint standards were issued on Tuesday, June 9, 2015, by the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency. It follows the submission of over 200 written comments offered by consumer advocates and civil rights organizations voicing their support for more specific and concrete assessment criteria to remove barriers to improving diversity in the financial services workforce.