To promote its ongoing efforts to promote diversity, equity and inclusion (DEI), the New York State Department of Financial Services (DFS) announced an initiative to collect and publish diversity data on the demographics of the boards of directors and senior management teams of NY-regulated financial institutions. In his July 29thNS Letter from the business sector, DFS stressed that the transparency of this data will help measure progress towards the DEI goals, enable companies to assess their position against their competitors and increase transparency and accountability.
Based on its authority under New York Banking Law Section 37 (3) to require special reports from banking organizations, the DFS will record data on the gender, racial and ethnic makeup of the boards of all New York regulated (i) banking institutions of over 100 million US dollars in assets, (ii) non-custodian financial institutions with more than US $ 100 million in assets, (iii) and companies authorized to conduct virtual currency business. From late summer 2021, DFS will collect demographic data from 2019 and 2020 and publish aggregated data in the first quarter of 2022.
In the industry letter, DFS made it clear that it expects financial institutions to make DEI a strategic business and corporate governance priority at management level, and stressed the importance of building a pipeline of diverse executives. The DFS underlined data reflecting existing gender and racial gaps in industry leaders, based in part on the 2019 US House of Representatives Financial Services Committee Analysis of bank diversity data.
DFS has presented both business and social reasons for its data reporting initiative. From a business perspective, DFS highlighted the increasing industry-wide actions by investors and governments to encourage diversity in senior management as it improves profitability, improves risk management and increases employee satisfaction. DFS further emphasized that in view of the challenges posed by the COVID-19 pandemic, racial injustice and climate change, it is now “of the utmost importance that the banking and finance industry has strong boards of directors and management teams made up of people with different experiences and skills and perspectives exist to better meet developing risks and to find new opportunities. “