The four federal banking agencies (FDIC, OCC, FRB and CFPB), along with two other agencies (SEC and NCUA), have released new uniform standards for assessing a financial institution’s diversity policies and practices. The standards were first proposed as a policy statement in October of 2013. The final policy statement includes some additional clarifying language and became effective on the date of its publication, June 10, 2015. Read the standards here.

The stated purpose of the new standards is “to provide a framework,” mandated by the Dodd-Frank Act, for banks and other regulated entities to create and strengthen their diversity policies and practices. The standards are split into five sections, with specific checklists of standards in each section, addressing an organization’s:

• (1) Commitment to diversity and inclusion, particularly from its leadership
• (2) Workplace profile and employment practices, including the use of metrics to track how many women and minorities it employs
• (3) Procurement practices and the diversity of the vendors providing products and services, including an examination of the organization’s outreach efforts to minority- and women-owned businesses
• (4) Transparency of organizational diversity and inclusion, with the suggestion that organizations should publicize certain information about their diversity policies and practices on their websites or through other media
• (5) Annual self-assessments and ongoing monitoring of the organization’s performance under these standards — and organizations are encouraged to share these self-assessments with their regulators and the public

Will my institution’s examiners be reviewing our diversity policies and practices under the new standards?

No. The final version of the standards includes the following statement: “The Agencies will not use their examination or supervisory processes in connection with these Standards.”

Are the new standards mandatory?

No, the final version of the standards states that “use of the standards by a regulated entity is voluntary.”  In addition, the Dodd-Frank Act limits the reach of the standards by stating that they must not “mandate any requirement on or otherwise affect the lending policies or practices of any regulated entity . . . .”

Do the new standards apply to small institutions?

Yes, the new standards do not exempt any entities based on size. However, the introduction does state that the standards are “focused primarily on institutions with more than 100 employees.” In addition, each of the standards’ five sections is introduced with a statement that they should be applied “in a manner reflective of the individual entity’s size and other characteristics.”

If my institution shares its self-assessment with a regulator, will that information be made public?

Not likely, provided that your institution designates the self-assessment as confidential commercial information. The agencies intend to use information from self-assessments to “monitor progress and trends,” but any information published by the agencies will “not identify a particular entity or individual or disclose confidential business information.” If an institution chooses to share its self-assessment with the regulators, the Guidance recognizes that it may choose to designate its submission as “confidential commercial information.” That designation likely will qualify the self-assessment for an exception from public disclosure under the Freedom of Information Act (FOIA).

What is meant by “diversity”?

The standards define “diversity” to refer to women and minorities (“Black Americans, Native Americans, Hispanic Americans, and Asian Americans). The agencies did not choose to expand the definition to include individuals with disabilities, veterans, and lesbian/gay/bisexual/transgender (LGBT) individuals — although the standards state that organizations can choose to adopt broader definitions if they so choose.

Do the new standards apply only to our employment policies and practices?

No, the standards also include an assessment of an organization’s procurement policies. Organizations are encouraged to assess the diversity of their vendors and to actively recruit minority- and women-owned businesses. The standards even drill down to the subcontractor level — it is suggested that organizations encourage their contractors to use minority- and women-owned subcontractors “by incorporating this objective in their business contracts.”

Can I comment on the final standards?

Yes, until August 10, 2015. While the comment period for the October 2013 proposed standards has expired, there is an opportunity to comment on the voluntary collection of information suggested by the rules. Specifically, the agencies are requesting comments on public reporting of data on an organization’s website and sharing an organization’s self-assessment with its primary regulators and with the public. Share your comments on these issues with the FDIC, FRB, OCC or CFPB.