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A banking regulator’s approach to DEI issues

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Diversity, equity and inclusion is a key issue for banking institutions, and also for the federal agencies that regulate them.

Nikita Pearson, director of the FDIC’s Office of Minority and Women Inclusion, tells us what her agency is doing to promote DEI  internally and at banks.

A few takeaways from the conversation:

  • A key element of the FDIC’s strategy for DEI include positioning the agency’s diverse employee base for growth and advancement.
  • As it becomes a more prominent issue, her experience is that banks are viewing DEI as something that makes good business sense.
  • The challenge is transforming commitment into achievement – this means helping more people get access to the financial system.

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Below is a full transcript of my interview with Nikita Pearson.

Making progress in diversity, equity and inclusion is high on the to-do list for banking institutions, and it’s no less of an imperative for the entities that oversee the financial services industry. Our guest this week is Nikita Pearson, director of the FDIC’s Office of Minority and Women Inclusion, OWMI for short. We’ll be talking about what the FDIC is doing to promote DEI inside its walls, and also how the agency’s experiences can benefit banks. Nikita, we’re happy to have you with us on the BAI Banking Strategies podcast.

It is an absolute pleasure to be here with you, Terry.

So, Nikita, on your LinkedIn profile page, there is a banner at the top saying, “Fostering a safer, fairer and more inclusive workplace and banking system.” This seems to be a great place to start our conversation. “Safer, fairer and more inclusive” – in an overview sense, what do each of these words mean to you in the banking context?

Terry, in the banking context, these words really illustrate some of the different aspects of the FDIC’s mission. We want the public to have confidence that our insured financial institutions will keep their money safe, will treat them fairly and provide them with the products and services to help them meet their financial goals and serve the financial needs of the communities. From my perspective, and I think about the DEI work that I do, true equity and inclusion can’t be achieved until all Americans have access to the benefits of the banking system.

You started at the FDIC fresh out of college as a bank examiner. You’ve worked your way up through the ranks to your current position, in which you are also deputy to the chairman for external affairs. How has that experience of seeing the FDIC from various vantage points, how has it informed your values and your goals, and maybe the mission of the OMWI?

It’s really broadened my perspective. It’s deepened my sense of empathy and ultimately helped me to inform the direction and approach of our work in OMWI. Just for the audience who may not be familiar with OMWI or the Office of Minority and Women Inclusion, we really have three primary responsibilities.

We look at equal employment opportunity for women and minorities. We look at increasing supplier diversity in our agency operations, and we also assess diversity policy and practices at our banks. I’ve had the honor of being a part of the FDIC family for 24 years. My path of being a Black woman, who came in at an entry-level bank examination position and going on to be one of the highest-ranking women and persons of color in the agency, really helped me as we were working on our workforce diversity strategy. I was able to reflect back and help to identify potential barriers to equal employment opportunities, and also think about how to replicate some of the successes I’ve seen within the agency. As I think back to my time as a bank examiner, some of the things that I really learned and saw in practice is that having diverse perspectives really brings a valuable range of outlooks and opinions and suggestions. There’s all the things that go into decision making and problem solving, and so these different perspectives can help truly make a success of a bank.

The FDIC has a three-year strategic plan for diversity, equity and inclusion that we’re now in the middle year of, so Nikita, could you tell us some of the top goals of that plan for the 2021-2023 time period?

We really stretched ourselves to go beyond what we’ve done in the past. For the first time, we really defined our mission, our values and our vision as it relates to the DEI work. We went beyond just the things related to our workforce and started looking at our community. We outlined five areas, and to make it easy for everyone to remember, there are five Cs. We look at culture, we look at career, we look at communication, consistency, and community. With our culture, we really understood the fact that culture eats strategy for breakfast. We can have a good strategy, but we also have to have a great culture to make sure that we actually implement the plan appropriately. We want to make sure everyone has equal opportunity to succeed at every point within the deployment cycle at the FDIC. Then when it relates to our communications, we want to build trust through transparency with both our FDIC employees and also with the public. We want to be consistent. I heard this great quote one time, Terry. It said that, “Intensity makes for a good story, but consistency makes for progress.” We want this to be more than just something that is on the front page of the news right now. We want to make sure that we are consistent in making progress. Lastly, we want to make sure that within our mandate, that we continue to impact the communities we serve through our regulated banks and also with supporting minority- and women-owned businesses.

What are some of the key challenges that you’re encountering implementing your DEI plan, and how has your office had to adjust or adapt your approach to be able to get around the obstacles and to make progress toward achieving your goals?

The thing with ambitious goals is they do not come without challenges, particularly in this area because some people may feel alienated rather than included by our DEI efforts. My goal here is really to help everyone see themselves as a benefactor in the process. Until we’re really able to fully engage people’s humanity, meaning meeting them where they are, we’re not going to be fully successful in this space. Something that we’ve done is, we did a national listening tour. We included sessions and discussions related to LGBTQ+, individuals with disability, veterans, caregivers, different religious beliefs, grown up in rural communities, first-generation professionals. We had over 1,000 FDIC employees participate in these different sessions and really helped us identify the challenges. But it also brought us together when it comes to this space and everyone could see themselves in the work we’re doing. Another challenge that we’ve had is really changing the perspective that DEI work is just the work of OMWI. We’ve established DEI as an organizational priority. We’ve taken a really all-hands-on-deck approach. We established our first-ever corporate performance goal dedicated to this work. That really gave our DEI work the same visibility and commitment as our other mission-critical work. All of our managers are being held accountable for achieving results, and their efforts are now considered as a part of their annual performance review and compensation program. If you’ve ever been a person who made a New Year’s resolution, you can think about how you’ve looked to make a change for something that you’ve wanted to do for yourself. If you think about how hard it is for you to change yourself, you’ll know how hard it is to change other people or to change the direction of a large group. I say all that to say, we recognize that it is challenging work, and there’s also a lot of goodwill and opportunity there and we’re going to work towards those goals together.

A number of OMWIs were created under the Dodd-Frank Act. They exist at the OCC. They exist at the SEC within the Fed and other financial regulatory bodies as well. I’d imagine, Nikita, that each OMWI faces similar challenges and you likely have similar goals. Do these offices work together? Do you share insights and best practices so that each can benefit from the innovations and the learnings, the experiences of the others?

We do have some of the same challenges and opportunities. We regularly communicate with each other. We actually have monthly meetings where we share insights and best practices. Between those monthly meetings, we have regular interactions because normally when something pops up at one agency is something that another agency either has dealt with, is dealing with, or may potentially deal with. Because our offices are all relatively small compared to the rest of our agency, something we also do is partner together and pool our resources for different events and activities. The OMWI directors, we’re a pretty tight knit group because we’re all united and working towards a common goal.

Speaking of the FDIC and its role as a regulator, how does your OMWI work in that particular capacity in terms of advancing DEI initiatives at banks?

OMWI’s work is really separate from our bank supervision work. What OMWI is responsible for, though, is actually implementing and overseeing the FDIC’s financial institution diversity program. As a part of that, we ask our banks to voluntarily complete a diversity self-assessment. We compile all this information and we look across the industry to really identify and share some of our best practices. We’re looking for opportunities to strengthen our program by increasing the rate of participation. We’re also looking to strengthen our analysis and make it a more helpful tool for banks to be able to achieve their DEI goals. I’d have to be clear that this isn’t just about us collecting data – it’s also about how can we really help support diversity within financial institution diversity programs. Our work is really how can we not only assess but help position financial institutions to be in the best positions to serve the needs of all the communities that they serve.

OMWI includes the interests of both minorities and women in a single office in its name. No doubt there’s a lot of overlap in the challenges that both minorities and women face in banking. But how do those interests differ in terms of priorities, in terms of the progress that’s being made, in terms of the challenges that lie ahead?

That’s a tough question for me, Terry, because I’m a black woman. As a black woman in banking, I really find it difficult to separate the issues that relate to women and those that relate to people of color. With all that being said, though, we do monitor the workforce statistics as it relates to women and minorities. For the FDIC, a key challenge that we have is promoting racial, ethnic and gender diversity within our bank examiner workforce, which is basically the bulk of the workforce at the FDIC and also tend to be the individuals who go on to take on different leadership roles in the organization, like I have. In our most recent annual report to Congress, what we reported is that we’ve actually seen minority representation at the FDIC increase across all levels of management, including our executive management. We also noted that we’ve seen an increase in women in the entry-level bank examiner position. But like other agencies, we are seeing an increase in retirements and people leaving the agency for a variety of different reasons. We’ll be challenged to keep up our efforts, to continue to be intentional, and to be able to achieve these results when there are so many different dynamics happening within the workforce.

DEI issues are getting more public attention from banks – commitments are being made, guideposts are being established and the like. From where you sit and considering the experience that you’ve had at your time at the FDIC, how do you think banks are doing on DEI and what could they be doing better?

I’m really excited what I’m seeing from financial institutions. Many are stepping up to the plate. They’re announcing their commitments, they’re leaning into different initiatives, and many of them are making progress. The challenge and probably the most important thing that I’ve seen as part of the success with financial institutions is that they really see this work not just as some type of philanthropic effort. They really see it for what it is. It is a mission enabler. It just makes good business sense. The challenge will be fully implementing these ways to actually get some meaningful progress, meaning serving underserved communities, small and minority- and women-owned businesses, actually getting the capital into their hands, helping people continue to build better lives through the financial system. In Georgia where I’m from, what we would say is that the proof is in the pudding, making sure that we have measurable results at the end of the day.

Nikita, we’re potentially heading into some more challenging economic times. The inflation rate and Fed action on interest rates have raised concerns about a recession, possibly in the not too distant future. Do you have any concern about the commitments and the progress that’s being made, that there might be some backsliding if economic times turn tougher for banks?

I will always be a risk-management bank examiner at heart. I spent many years of my life doing it. With that, I am keen to identifying risk, and so I would say I do have some concern about it. But I had a conversation not long ago with the CEO of a large institution about this exact same issue. I was chatting with him about the role of his diversity officer. I asked him, ‘How does he see this role?” There’s a level of economic uncertainty and a lot of things that come along with that. He said something that I’ll never forget. He said, “I see this role helping us to lead that work.” I thought to myself, what amazing progress that we’ve made that the CEO of a large bank is thinking about a diversity officer’s role in the impact of diversity, equity, inclusion and accessibility as a driver for going into some uncertain times. What we know is including people with diverse ideas and experiences and decision making really can help financial institutions reach the broadest customer base and really give them line of sight into both risk and opportunity. I’m looking forward to the industry rising to this challenge as they’ve risen to challenges time and time again.

Nikita, one final question. As if you don’t have enough going on, you are also involved in the White House Initiative on Historically Black Colleges and Universities. You’re the co-chair of its economic development cluster. What does that work entail, and how does that role tie into your day job promoting DEI efforts in banking?

I am a graduate of an HBCU, Savannah State University in Savannah, Georgia. As I lived in Savannah, one of the things that I noticed, not only with my HBCU but many HBCUs, is that they have a really rich history and legacy of serving low and moderate-income communities. But many of them, besides the normal role that they take on with education, they have struggled to really find and benefit from economic development and how they can better serve the HBCUs. Many of them don’t have the resources in order to do that. One of the things that we’ve been working on is creating a framework for HBCUs to be able to take and to scale to better serve them in meeting their economic development needs. Something else we’ve been doing with this work is really looking at how to increase the financial capacity of HBCU students. Then we’re also looking at providing career opportunities, helping HBCU students learn more about the FDIC and other job opportunities within the financial regulatory services area. It’s a huge job. There’s a lot of work to be done in it, but I’m personally and professionally proud to be a part of this effort.

It sounds like a huge job, but as someone who was not in the same position not so long ago in Savannah, you can no doubt offer a valuable perspective for young people at HBCUs who might be attracted to a similar path. So, Nikita Pearson, director of FDIC’s Office of Minority and Women Inclusion, thank you again for joining us on the BAI Banking Strategies podcast.

Well, Terry, I have to tell you that this has been the highlight of my day, not only because you’re here, Terry, but because you’ve given me the opportunity to talk about things that are near and dear to my heart. Thank you.

Of course.

Terry Badger, CFA, is the managing editor at BAI.