Visa’s problems on Friday need a little time to digest, and for the full picture to start to emerge; similarly, the FCA’s two substantial consultations on high cost credit and unauthorised overdrafts. So, this weekend I’ll focus instead on the latest evidence that diversity & inclusion should be edging towards the centre of the regulatory agenda.

The 2010 Equalities Act imposes certain duties on public bodies, including regulators, to apply its protections in the exercise of their powers. So, as it became law, the FSA debated internally how best to do this. 

At its simplest, the argument was about whether there was enough hard evidence that Group think was a major contributor to the financial crisis and, if there was, whether diversity was part of the answer. The FSA pushed at this in various ways but, with its splitting into the FCA and PRA, leadership and focus shifted and the momentum was lost.

I’ve written before about the relationship between diversity & inclusion and culture more broadly, and, while gender is only one of the protected characteristics, the recent gender pay gap reporting (another provision of the 2010 Act) underscores the extent of inequality that persists. 

The Boardroom, given the relative success of the 30% Club, had been see as one area of progress but, given this report and the attitudes it reveals, that now seems optimistic. And, although other protected characteristics - such as disability, sexual orientation, ethnicity and faith – are generally less easy to monitor, there is little evidence their progress has been any greater. 

Some of the underlying issues here are society-wide. But others, including lack of diversity at senior levels, sit squarely within firms’ ability to change. 

Regulators have adopted SMCR as their current tool of cultural change, and the clearer accountability this brings is almost certainly part of the answer to improving firm culture. But it’s not obvious there is any harder evidence for this than there is around Group think and cultural homogeneity at senior levels. The main difference, perhaps, is that the Parliamentary Commission on Banking Standards threw its weight behind one and not the other.

If more evidence is needed, then regulators could use their convening power to stimulate the necessary research to find out the answer.

My own suspicion is that greater diversity and better inclusion would help reduce both the likelihood and the impact of many of the factors we have seen contributing to poor culture – e.g. narrowly focused incentives, a lack of questioning particular decisions or behaviour, low understanding of customer needs.

And this should be just as important to firms. Many have made genuine progress in attracting a greater diversity of applicants and recruits, but fewer have made a success of their retention, or of enabling staff from diverse background to move up the organisation. The costs of all this must be significant, but are hard to measure and few try to do so seriously. 

It is hard not to believe that firms who get D&I right will reap a big advantage, and also be much better prepared for the coming waves of technological change. But it is also clear from the history, and this is a real challenge for both firms and regulators, that an incremental approach is unlikely to work.