Are You Ready For Your Self-Assessment?

November 8, 2013 at 8:10 am Leave a comment

One of the little chestnuts tucked away in the Congressional wish list that is Dodd-Frank is a requirement that financial institutions promulgate guidelines for assessing how good a job financial institutions do at fostering diversity in their workplace.  Specifically, section 342 requires each financial agency’s Office of Minority and Women Inclusion to develop standards for “assessing the diversity policies and practices of entities regulated by the agency.”  Crucially, the statute stipulates that these assessments should not be construed to mandate any requirement regarding an institution’s lending policies.

While I am tempted to point out that financial institutions are already among the most highly regulated businesses in the country when it comes to issues involving Race and minority advancement, the law is the law, so the question is how can this regulation be shaped in a way that does not needlessly burden credit unions while providing a benefit.

These seem to be the questions still vexing regulators, including the NCUA.  Recently the major bank regulators came out with proposed guidance to implement Dodd-Frank’s mandate and they seem more than willing to consider unique approaches to assessing how lending institutions of all shapes and sizes are doing when it comes to hiring minorities.  The regulation actually calls on financial institutions to make a “self-assessment” of a range of hiring and contracting practices.  The preamble stresses that the “assessment envisioned by the agencies is not one of a traditional examination. . .Agencies will not use the examination or supervision process in connection with these proposed standards.”  In addition, institutions would be encouraged but not required to make these assessments available to their regulators and the public through their websites.

Finally, the regulators repeatedly stress that they know many institutions already have to demonstrate how they are fostering diverse workplaces by, for example, requiring institutions with 100 or more employees or who are federal contractors with 50 or more employees, that meet certain conditions, to file reports with the Equal Employment Opportunity Commission.

Assessments could be designed in a way that reflect an individual entity’s “size and characteristics.”   So, what exactly is required under this proposed self-assessment guidance?  All institutions, regardless of their asset size or number of employees would be required to assess 1) the organizational commitment to diversity and inclusion considerations in employment, promotion and contracting; 2) how policies and procedures allow your institution to evaluate the effectiveness of their efforts at workplace diversity; 3) the extent to which they take a vendor’s record on diversity into account when making contracting decisions; and 4) the extent to which it publicizes its diversity efforts.

As it stands right now, these regulations are a lamb in sheep’s clothing since regulators could have used their Dodd-Frank mandate to impose much more onerous requirements than they are currently suggesting.  Nevertheless, these self-assessments will impose new burdens, particularly on smaller credit unions that may not have formalized their minority hiring and promotion practices and policies.  Furthermore, today’s self-assessment could be tomorrow’s public mandate.  In the hands of the wrong regulators, section 342 has the potential to become an HR nightmare for credit unions.

A quick note:  the links have not been working for the past couple of days so feel free to visit NCUA’s website to look at the proposed regulations.  I’m going to God’s Country, aka Long Island, so I will be back on Tuesday.


Entry filed under: General, HR, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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