This month, six (6) federal financial agencies published a final Interagency Policy Statement, as required by Section 342 of the Dodd-Frank Act. This Interagency Policy Statement outlines standards for assessing the diversity policies and practices of the entities regulated by each agency, including banks and financial institutions. Section 342 requires the establishment of an Office of Minority and Women Inclusion (“OMWI”) at each agency and the director of OMWI at each agency is to develop standards for assessing the “diversity policies and practices of entities regulated by the agency.” (80 Fed. Reg. 33)
I imagine that the initial purpose of forming these OMWIs was noble in that, after the financial crisis that disproportionately affected minorities and women, the drafters wanted to solve one of the underlying problems—which is or was entities targeting these specific, vulnerable groups. The logic being that if an entity has a strong diverse workforce, they will have more minorities and women decision makers to protect…well…other minorities and women. However, I make 3 observations and I will let you decide for yourself if the diversity standards accomplish the initial goal of diversity.
1. Section 342 doesn’t seem to have any enforcement mechanism. As a state legislator, I know that a law is only as good as its enforcement. The OMWI Director at each agency is required to develop standards for assessing the diversity policies and practices of each entity. I understand the need to develop consistency in assessing diversity policies. That’s a start. But what happens if one of these regulated entities does meet the standards of the assessment? I am looking through the remainder of Dodd-Frank as this is being published to undercover the enforcement mechanism behind these standards.
2. The Policy Statement allows an “out” for remote areas and small entities. The Policy Statement clarified that those regulated entities in remote areas or small entities may face challenges in including minorities and women and so each Agency may tailor the standards to account for those seeming handicaps. I could easily imagine this flexibility getting abused if there are not consistent, clear and a minimum level of expectation in including minorities and women with these particular entities. Time will tell.
3. The Policy Statement purposefully leaves out a group of people. It intentionally does not include those with disabilities and lesbian, gay, bisexual and transgender individuals. Now this is generally consistent with federal law across the board but I wonder, given our changing society, if this will change. The definitions of “minorities” does not preclude a regulated entity from using broader terms. It may even behoove entities to create a broader definition. Just an interesting observation.
What do you think of my 3 observations and what can the Agencies to strengthen diversity in regulated entities of Dodd-Frank?