With the current overwhelming regulatory burden, many banks may not have given the issue of workplace diversity much, if any, consideration. However, the regulators have begun sending letters to banks across the country questioning whether the banks have, among other things, completed a diversity self-assessment and whether they want to report the results to their regulator. This letter has lead banks to scramble to get up to speed on this issue, so the purpose of this article is to explain the current guidance.
By way of background, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required each federal financial regulatory agency to establish an Office of Minority and Women Inclusion and instructed the office’s director at each agency to develop standards for assessing the diversity policies and practices of its regulated institutions. As a result, in June 2015, multiple regulators published a policy statement on assessing diversity policies.
Diversity assessments aren’t mandatory, but the policy statement shouldn’t be ignored. Instead, your bank should review its practices and decide how to address the policy statement. At a high level, the standards set forth in the policy statement address the following:
- Organizational Commitment to Diversity and Inclusion: This describes how a bank promotes diversity and inclusion in both employment and contracting and how it fosters a corporate culture that embraces diversity and inclusion.
- Workforce Profile and Employment Practices: This could include promoting the fair inclusion of minorities and women in the bank’s workforce by publicizing employment opportunities, creating relationships with minority and women professional organizations and educational institutions, creating a culture that values the contribution of all employees, and encouraging a focus on these objectives when evaluating the performance of managers.
- Procurement and Business Practices—Supplier Diversity: This might involve expanding available third-party options by increasing outreach to minority-owned and women-owned businesses, including using metrics to identify the baseline of how much the bank spends procuring and contracting for goods and services, how much the bank spends with minority-owned and women-owned businesses, the availability of relevant minority-owned and women-owned businesses and how that may change periodically, as well as outreach to inform minority-owned and women-owned businesses of these opportunities.
- Practices to Promote Transparency of Organizational Diversity and Inclusion: The bank might want to make public its commitment to diversity and inclusion through normal business methods, which include displaying information on the bank’s website, in the bank’s promotional materials, and in the bank’s annual report to shareholders, if applicable.
- Self-Assessment: Banks can allocate time and resources to monitoring and evaluating performance under their diversity policies and practices on an ongoing basis.
The policy statement makes several important points:
- Completion of a self-assessment is voluntary.
- The standards do not create new legal obligations. However, because of the increased focus on diversity policies in banks, the standards should not be ignored.
- The agencies may use the information submitted to them to monitor progress and trends with regard to diversity and inclusion in employment and contracting activities.
- Agencies are allowed to publish information disclosed to them in any form that does not identify a particular entity or individual or disclose confidential business information.
Based upon the agencies strong encouragement to perform a self-assessment, banks should consider assessing all aspects of their diversity policies and procedures to determine areas of success, and areas for growth. Most banks with 50 or more employees are required to have affirmative action plans, because they are considered federal contractors, as they serve as a depository of federal funds, or as an issuing and paying agency for U.S. savings bonds and notes in any amount; or are covered by deposit insurance. Banks with 100 or more employees are already subject to reporting under the Equal Employment Opportunity Commission’s EEO-1 filing.
The standards in many cases will outline similar mechanisms to ensure diversity and inclusion. Because Title VII of the Civil Rights Act applies to virtually all banks, it is a good idea to have diversity policies and a method by which to measure their effectiveness. Banks should consider consulting with their legal counsel regarding implementing affirmative action plans, putting together a self-assessment program and developing any necessary employment policies, or ensuring that current policies comply with federal, state, and local laws.