U.K. Watchdog Might Block Hires If Firms Fall Short on Diversity

Nikhil Rathi, who is set to lead Britain’s markets watchdog, has a warning for the finance industry: Increase diversity or supervisors will force change.

In his first extensive comments since being named the next boss of the Financial Conduct Authority, Rathi said that increasing the industry’s diversity is among his top priorities and that he expects firms to pay more attention to whether their staff and culture reflect society at large.

“I would have an expectation over the coming years to see boards, to see senior leaderships at major financial institutions working hard on these issues to deliver diversity and change culture,” Rathi told the U.K. parliament on Wednesday. “And if we are seeing that progress not happening then at some point it becomes a supervisory matter, and it may even become a matter that we would need to deal with in how we decide whether to approve an appointment or not.”

The Black Lives Matter movement has prompted a global reckoning over race, leading companies and governments to call for greater diversity among their employees. The FCA, which oversees tens of thousands of financial firms, has said that it too needs to increase gender and racial diversity among its senior leadership.

Rathi, a senior executive at London Stock Exchange Group Plc before being picked as the watchdog’s next boss last month, is slated to take over as the FCA navigates the fallout from Brexit as well as the U.K.’s recovery from the pandemic. Rathi said Britain should look to maintain tough regulatory standards, and disagreed with calls from some industry bodies to give the watchdog a specific goal to make the country’s financial markets competitive with those around the world.

“I worked for an organization that used to lobby for it, but I’ve never personally been a massive fan of it,” Rathi said of the competitiveness objective. He said a target like this is not “fundamentally necessary to have a very strong, successful, dynamic financial sector.”