House Democrats have proposed an addition to the “CAMELS” rating system that would include a “diversity and inclusion” score.
“We need to change it and we need to change it right away. The excuse that we can’t find any, that’s what I’m hearing from some of you, that’s not acceptable,” Texas Democrat Rep. Al Green said at a Wednesday hearing held by the House Subcommittee on Diversity and Inclusion.
“When you have power, you have to use it. We have the power. Regulations may be the thing to do. I think the carrot was a good idea, but after having heard some things today, I think we have to move to the stick, that’s regulations,” he added. The subcommittee was created by House Financial Services Committee Chairwoman California Democrat Rep. Maxine Waters.
Currently, the CAMELS system — also known as the Uniform Financial Institutions Rating System — rates a bank’s Capital adequacy, Assets, Management, Earnings, Liquidity, and Sensitivity to market risk on a scale of one to five. The new bill would extend the Dodd-Frank Wall Street Reform and Consumer Protection Act to include “Diversity” for judgment by the “Board of Governors, the Comptroller of the Currency, the Corporation, and the National Credit Union.”
In 2018, Waters said she was “appalled” at the “lack of diversity” in Silicon Valley, in particular. “I know that there are a number of organizations, civil rights organizations that have been working very hard to increase participation of minorities and women in the Silicon Valley businesses,” she said.
“They have not done very well, and of course I would be anxious to be of assistance to them in making sure that we could reduce the costs and reduce the hassle of becoming IPOs,” she continued, adding one crucial caveat: “But we certainly must take into consideration whether or not these companies are developing, understanding that some of us are going to be focused on diversity in those companies.”
One financial institution is already getting ahead of the legislation. In January, Goldman Sachs Group CEO David Solomon announced the company “will no longer take a company public in the U.S. and Europe if it lacks a director who is either female or diverse.”