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House committee report urges large banks to release diversity data
On February 12, Maxine Waters, Chairwoman of the House Financial Services Committee, and Joyce Beatty, Chair of the Subcommittee on Diversity and Inclusion, released a majority staff report titled “Diversity and Inclusion: Holding America’s Large Banks Accountable,” which details diversity and inclusion data and policies collected from 44 of the nation’s largest banks. The information requested from the banks included, among other things, (i) “[e]mployee compensation by gender, race, and ethnicity”; (ii) demographic information about the banks’ boards; (iii) data regarding “staff and budget dedicated to diversity initiatives”; and (iv) “diversity policies and practices.” The committee staff found that boards of directors and senior employees at banks are not diverse, and that “[b]anks have limited spending and investments with diverse firms.” Additionally, it was found that “workforce diversity is more visible in entry level rather than executive and senior level positions.” The report recommended a number of avenues for banks to improve diversity and inclusion such as disclosing diversity data to the public and to regulators including bank board diversity. The report also suggested “[i]ncreased spending and investment with diverse” firms and vendors. According to the press release, Congressional legislative actions in these areas would “improve diversity and inclusion at America’s largest banks.”
Waters says housing finance reform and diversity are top priorities
On April 2, House Financial Services Committee Chairwoman Maxine Waters (D-CA) spoke before the American Bankers Association’s Washington Summit to discuss several priorities and emerging issues, including comprehensive housing reform, diversity in financial services, fintech regulation, cannabis banking, and Bank Secrecy Act/anti-money laundering (BSA/AML) reform.
- Housing finance reform. Waters discussed resolving the long-term status of GSEs and several core principles underlying housing finance reform including, among other things, (i) maintaining access to the 30-year, fixed-rate mortgage; (ii) ensuring sufficient private capital is available to protect taxpayers; (iii) requiring transparency and standardization that ensures a level-playing field for all financial institutions especially community banks and credit unions; (iv) maintaining credit access for all qualified borrowers; and (v) ensuring access to affordable rental housing. “Many of the proposals for housing finance reform exclude small financial institutions from being able to access the secondary mortgage market. I believe that the inclusion of small financial institutions must be a critical part of any conversations about GSE reform,” Waters stated.
- Diversity in financial services. Waters discussed the newly formed Diversity and Inclusion Subcommittee (previously covered by InfoBytes here) when noting that minority representation in financial services management positions remains underrepresented. The new subcommittee will examine diversity trends to promote inclusion. “Diverse representation in these institutions, and particularly at the management level, is essential to ensure that all consumers have fair access to credit, capital, and banking and financial services,” Waters stated.
- Fintech regulation. Waters commented that fintech regulation is a committee priority. Waters stated that it is important “we encourage responsible innovation with the appropriate safeguards in place to protect consumers and without displacing community banks.”
- Cannabis banking. Waters highlighted her committee's work last month in advancing HR 1595, which would create protections for financial institutions that provide services to state-sanctioned cannabis-related businesses. The bill would create a safe harbor for depository institutions that would bar federal banking regulators from terminating banks’ deposit insurance or otherwise penalize them if they provide services to a cannabis-related legitimate business or service provider.
- BSA/AML reform. Waters discussed a hearing that was held to look at “common sense” improvements that could be made to the current BSA/AML framework. She further stated that the committee is considering beneficial ownership legislation, in addition to exploring ways to work with the Financial Crimes Enforcement Network regarding BSA/AML reporting.
House Diversity and Inclusion Subcommittee holds first hearing
On February 27, the newly formed Diversity and Inclusion Subcommittee of the House Financial Services Committee held its first-ever hearing to examine trends in diversity in the financial services industry, including management-level diversity and diversity among potential talent pools. The hearing reviewed the November 2017 GAO Report on “Representation of Minorities and Women in Management and Practices to Promote Diversity, 2007-2015” with the Director of Financial Markets and Community Investment of GAO, David Garcia-Diaz, as its only witness. The hearing focused on the report’s conclusion that in the financial services industry, there were marginal increases in minority representation in management positions while women’s representation remained unchanged from 2007 to 2015. Representatives noted the importance of diversity and inclusion in a financial institution’s work force and requested Garcia-Diaz discuss the best practices to increase employment diversity. Among other things, Garcia-Diaz noted that in order to increase diversity financial institutions should (i) engage in broad-based recruitment; (ii) establish mechanisms to hold managers accountable, such as linking manager compensation to diversity goals; and (iii) use data analysis to assess the diversity in the organization in order to develop an intentional plan to address the issue.
The committee memorandum is available here.