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In late October, the primary Federal banking and financial industry regulators (Federal Reserve, SEC, CFPB, OCC, FDIC, and NCUA) issued a Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies. The agencies are required to adopt such a Policy Statement and undertake such assessments by the Dodd-Frank Act.

The proposed Policy Statement identifies four standards on which banks and other regulated entities will be assessed:

  • Organizational commitment, in employment and contracting, to diversity and inclusion, including a recommendation that larger institutions have Chief Diversity Officers and smaller institutions assign similar responsibilities to senior officers.
  • Employment practices, through the use of EEOC or OFCCP reporting for institutions required to file such reports or, for other institutions, through assessing metrics relative to recruiting, hiring, promotions, and separations, as well as evaluating institutions’ community outreach policies or practices.
  • Supplier diversity, by the evaluation of institutions’ promotion of fair opportunities in procurement and diverse supplier pools.
  • Transparency of diversity and inclusion activities, through public disclosure by regulated entities.

Significantly, the regulatory agencies have stated in the proposed Policy Statement that they will not utilize the examination or supervision processes in connection with the proposed standards. Rather, they are requesting that institutions voluntarily disclose to the appropriate regulators the results of self-evaluation assessments.

What will be interesting to watch, once the Policy Statement is finally issued and implemented, is whether the regulatory agencies in fact keep their assessments of diversity practices separate from the examination and supervision processes, or if they allow those assessments to affect exam ratings or application processing. We have seen instances in the past where regulators have cited in examinations a failure to follow “guidance” as being equivalent to a violation of a rule or a law.