To continue its ongoing diversity, equity and inclusion (DCI) efforts, the New York State Department of Financial Services (DFS) announcement an initiative to collect and publish diversity data on the demographics of boards of directors and management teams of financial institutions regulated by NY. In his July 29e business industry letter, DFS stressed that transparency around this data will help measure progress towards DCI’s goals, allow companies to assess their standing relative to their peers, and increase transparency and accountability.
Relying on its authority under New York Banking Act §37 (3) to require banking organizations to prepare special reports, DFS will collect data on the gender, racial and ethnic composition of boards of administration of all banking institutions (i) regulated by the State of New York with more than $ 100 million in assets, (ii) non-depository financial institutions with more than $ 100 million in assets, (iii) and entities authorized to conduct business in virtual currency. DFS will collect demographic data for 2019 and 2020 starting in late summer 2021 and release aggregate data in the first quarter of 2022.
In the letter from the industry, DFS made it clear that it expects financial institutions to make IEI at the leadership level of strategic business and corporate governance priorities, emphasizing the importance to develop a pipeline of diversified leaders. DFS highlighted data reflecting existing gender and racial diversity gaps among industry leaders, based in part on the U.S. House Financial Services Commission in 2019 analysis of banking diversity data.
DFS presented both the business and social rationale for its data reporting initiative. From a business perspective, DFS highlighted increasing industry-wide investor and government actions to advance diversity in senior management as it improves profitability, improves risk management and increases employee satisfaction. DFS further asserted that with the challenges posed by the COVID-19 pandemic, racial injustice and climate change, it is now “essential that the banking and financial sectors have boards of directors and teams of Strong leadership comprised of people with diverse backgrounds, skills and perspectives in order to better cope with changing risks and find new opportunities.