A top executive at the City watchdog has said there are still too many incidents of sexual harassment happening inside financial sector companies and criticised independent directors within some institutions for failing to act because they believe it is “political correctness gone mad”.
Jonathan Davidson, a member of the Financial Conduct Authority’s executive committee, said that while there had been some improvements in culture at the banks and insurers it regulates, there was still “a lot more to do.”
“We’re seeing too many situations where staff don’t feel safe, still. Indeed, we’ve seen markets in which female employees report persistent sexual harassment. And non-executive directors feel that our concerns are political correctness gone mad,” he said.
It is understood that board members at some banking and insurance firms have recently expressed views challenging the FCA’s policies on sexism and discrimination.
Davidson said directors who allowed such behaviour to go unchallenged were not “fit and proper” to hold their jobs.
“Let me be clear about how we feel about this and how the PRA [Prudential Regulation Authority] feel about it: We are concerned because such a culture is unhealthy and we consider senior managers who commit or countenance such behaviour as not fit and proper.”
Davidson, who is the FCA’s executive director of supervision for retail and authorisations, said culture was “at the root” of determining whether a firm is “going to cause harm”.
“I see a small and shrinking number of firms who don’t care about conduct, their purpose is just to make as much money as possible. They generally end up being sent to enforcement for investigation.”
His comments follow a string of scandals by insurers and banks including Coutts – the bank used by the Queen – where a top banker was accused of sexual harassment involving lewd comments and unwanted touching, dating back to 2015.
A recent survey of workers at insurance market Lloyds of London, which has been rocked by harassment claims, found that 500 of its respondents had either suffered or observed sexual harassment in the past 12 months alone.
Last year, the FCA confirmed that sexual harassment is considered misconduct under its rules.
Davidson said bank bosses felt they were juggling competing priorities when it came to cultural change, including investor pressure and a focus on short-term profits. Some also worried about “being the first moving to do the right thing”.
He added that the regulator was not going to prescribe a “one size fits all” solution, but said it was essential that safety was at the heart of any culture, adding that employees needed to feel comfortable raising concerns.
“A safe culture is an inclusive culture. If you don’t have an inclusive culture you won’t sustain diversity for very long; you won’t enjoy its benefits.”
Davidson said there was a “small but growing number” of firms that actually considered the “spirit of the rules” rather than approaching regulation as a box-ticking exercise. “They look at the spirit of the rules, they generally have healthy outcomes and a much lighter compliance cost burden.”
The FCA executive said that while the watchdog recognised that progress had been made in recent years, there was still work to be done.
“I see improvements in accountability, especially of leadership. I see improvements in speaking up and listening up, though I think there is a lot more to do on professionalism and middle-management enrolment in culture change.”
