The City's top regulators have abandoned plans to introduce new diversity and inclusion reporting requirements for financial firms, citing concerns about imposing additional "regulatory burdens" during a broader push for economic growth.

The Bank of England's Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) announced they will instead support "voluntary industry initiatives" aimed at boosting diversity and inclusion in the financial sector.

In a letter to Meg Hillier, chair of parliament's Treasury committee, PRA chief executive Sam Woods confirmed the regulators would "remain alert to the risks of groupthink" within their existing supervisory framework rather than requiring companies to report on measures to improve representation of women and minorities.

"We continue to think that an appropriate focus on diversity and inclusion in the culture of the firms we regulate can deliver improved internal governance, decision-making and risk management," Woods wrote.

He added that such focus "can support both safety and soundness – through reduced risk of groupthink – and the competitiveness of UK financial services over the medium to long term."

The decision comes after financial firms expressed concerns about potential duplication of efforts, as the government is already planning to introduce new legal reporting requirements for companies. During consultations with the regulated entities, many businesses highlighted the risk of overlapping compliance demands that could increase costs and administrative burden. Woods specifically noted in his letter that there is "an active legislative agenda in this area, including on gender action plans and disability and ethnicity pay gap reporting."

These incoming government requirements would cover much of the same ground as the proposed regulatory measures, potentially forcing firms to report similar data in different formats to multiple authorities, Woods argued.

The Treasury committee had previously voiced concerns that imposing additional reporting requirements would be redundant for "well-run firms" that should already be monitoring such metrics as part of good governance practices. Industry representatives argued that aligning any new regulatory approach with existing initiatives would be more efficient and cost-effective than creating parallel reporting systems.

The announcement coincides with a rollback of diversity, equity and inclusion policies in the United States that has accelerated under Donald Trump's presidency. Several large US corporations, including Google, Meta, Amazon and McDonald's, have scaled back their diversity programmes following Trump's election victory.

However, some UK companies have reaffirmed their commitment to diversity goals. Deloitte told its staff it remained "committed to our diversity goals" despite changes happening overseas, while the boss of Barclays expressed an "unwavering" commitment to inclusion.

The watchdog's emphasis on reducing regulatory burdens aligns with chancellor Rachel Reeves' recent calls for regulators to tear down red tape to encourage economic growth, including the folding of the Payments Systems Regulator (PSR) into the FCA.

"There is also a growing emphasis in our work on reducing regulatory burdens on firms while still delivering our objectives, and adding significant new requirements in this area could be seen as in tension with that approach," Woods noted.

The PRA's decision follows a Treasury committee inquiry into sexism and misogyny in the City, which found only "incremental improvements" had been made since 2018, with a "disappointing lack of progress on sexual harassment and bullying, including serious sexual misconduct."

In related news, FCA chief executive Nikhil Rathi announced the regulator is also abandoning controversial plans to identify more of the regulated companies it investigates. "Given the lack of consensus, we will not proceed with this and will therefore stick to our existing exceptional circumstances test to determine if we should publicise investigations into regulated firms," Rathi said.

Additionally, the FCA has delayed plans to introduce rules on non-financial misconduct, such as sexual harassment or bullying in the workplace, until June. These had been due this month, but Rathi said that while the watchdog was "still committed to this work," the "legislative landscape has also changed since we consulted," so it was "taking some further time to get this right."

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