its ongoing diversity, equity, and inclusion (DEI) efforts, the New York State
Department of Financial Services (DFS) announced an
initiative to collect and publish diversity data on the demographic makeup of
NY-regulated financial institution’s boards and senior management teams.
In its July 29th business industry
letter, DFS emphasized that transparency around this data will help
measure progress toward DEI goals, allow firms to assess where they stand
relative to their peers, and increase transparency and accountability.
Relying on its
authority under New York Banking Law §37(3) to require banking organizations to
make special reports, DFS will collect data on the gender, racial, and ethnic
composition of boards of all New York-regulated (i) banking institutions with
over $100 million in assets, (ii) non-depository financial institutions with
over $100 million in assets, (iii) and entities authorized to engage in virtual
currency business activity. DFS will collect demographic data from 2019
and 2020 starting in late summer 2021, and will publish aggregate data in the
first quarter of 2022.
In the industry
letter, DFS made plain that it expects financial institutions to make DEI at
the leadership level strategic business and corporate governance priorities,
emphasizing the importance of developing a pipeline of diverse leaders.
DFS underscored data reflecting existing gaps in gender and racial diversity
across industry leadership, based in part on the U.S. House Financial Services
Committee’s 2019 analysis of bank
DFS laid out
both business and social rationales for its data reporting initiative. From a
business standpoint, DFS highlighted increasing industry-wide investor and
government actions to advance diversity in senior management because doing so
improves profitability, enhances 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 “paramount
that the banking and financial industries have strong boards and executive
teams comprised of people with diverse experiences, skills and perspectives in
order to better confront evolving risks and find new opportunities.”
Ballard’s DEI Counseling team advises
clients across industries on the development, implementation, and enhancement
of DEI programs. Our attorneys performs assessments, develops strategic
plans, advise on existing programs, develop policies and communication
materials, conduct training, and facilitate the implementation of DEI programs.