Regulators are prioritising individual accountability for culture and D&I

This article

spotlights several developments during 2021 which illustrate the increasing importance of culture and individual accountability issues to regulators.

Against the backdrop of the FSCB's "two steps forward, one step back" assessment of culture within financial services firms, UK and EU regulators are pushing forward with their integration of diversity and inclusion measures into senior managers' responsibilities, remuneration requirements and recruitment.

It's true that the FCA might find it harder to take formal enforcement action for non-financial misconduct after the Upper Tribunal in Frensham clarified the extent to which the regulator must produce evidence sufficient to link the misconduct in question to the regulator's rules or objectives (read more on this decision here).

And it may well be difficult for the regulators to establish that, for example, a failure to meet diversity targets is caused by a failure of a senior manager to take reasonable steps.

But that might not hold the regulators back.  Substantial portions of their strategies are already underpinned not by actual or threatened enforcement action but instead by supervisory focus and even intervention.  So firms should expect more frequent and aggressive contact from supervisors on these issues into 2022.