Additionally, the financial services industry is a major source of  employment in the United States. Diversity in the Financial Services Industry at the Management Level Did Not Change Substantially between 1993 and 2004

Overall EEO-1 data do not show substantial changes in diversity at the  management level and suggest that certain financial sectors are more  diverse at this level than others. Figure 1 shows that overall management- level representation by minorities increased from 11.1 percent to 15.5  percent from 1993 through 2004. Specifically, African-Americans increased  their representation from 5.6 percent to 6.6 percent, Asians from 2.5  percent to 4.5 percent, Hispanics from 2.8 percent to 4.0 percent and  American Indians from 0.2 to 0.3 percent. Initiatives to Promote Workforce Diversity in the Financial Services Industry Face Challenges

Minorities’ rapid growth as a percentage of the overall U.S. population and  increased global competition have convinced some financial services firms  that workforce diversity is a critical business strategy. Financial Services Firms Have Implemented a Variety of Diversity Initiatives

Since the mid-1990s, some financial services firms have implemented a  variety of initiatives designed to recruit and retain minority and women  candidates to fill key positions. Officials from several banks said that they  had developed scholarship and internship programs to encourage minority  students to consider careers in banking. Some firms and trade  organizations have also developed partnerships with groups that represent  minority professionals and with local communities to recruit candidates  through events such as conferences and career fairs. A few firms have also developed performance indicators to measure  progress in achieving diversity goals. In addition, some industry officials said that achieving “buy-in” from key  employees such as middle managers could be challenging. An official from an  investment bank told us that the bank has been reaching out to middle  managers who oversee minority and women employees by, for example,  instituting an “inclusive manager program.”

	Minority- and Women- Owned Businesses Often Face Difficulties in Obtaining Capital

Studies and reports, as well as interviews we conducted, suggest that  minority- and women-owned businesses face challenges obtaining bank  credit in conventional financial markets for several reasons, including  business characteristics (e.g., small firm size) and the possibility that  lenders may discriminate. Some business characteristics may also limit the  ability of minority- and women-owned businesses to raise equity capital. Business Characteristics May Affect Minority- and Women-Owned Businesses’ Access to Commercial Loans and Equity Capital

Reports and other research, as well as interviews we conducted with  commercial banks, including minority-owned banks and trade groups  representing minority- and women-owned businesses, highlight some of  the challenges these businesses may face in obtaining commercial bank  credit. However, assessing such alleged discrimination may be complicated by  limitations in data availability. Likewise, at least one bank  official noted that Regulation B limited the bank’s ability to measure the  success of its efforts to provide financial services to minority groups.
Why GAO Did This Study

A July 2004 congressional hearing raised concerns about the lack of diversity in the financial services industry, particularly in key management positions. Some witnesses noted that these firms (e.g., banks and securities firms) had not made sufficient progress in recruiting minorities and women at the management level. Others raised concerns about the ability of minority-owned businesses to raise debt and equity capital. At the request of the House Financial Services Committee, GAO was asked to provide a report on overall trends in management-level diversity and diversity initiatives from 1993 through 2004. This testimony discusses that report and focuses on (1) what the available data show about diversity at the management level, (2) the types of initiatives that the financial services industry has taken to promote workforce diversity and the challenges involved, and (3) the ability of minority- and women-owned businesses to obtain capital and initiatives financial institutions have taken to make capital available to these businesses. For our analysis, we analyzed data from the Equal Employment Opportunity Commission (EEOC); reviewed select studies; and interviewed officials from financial services firms, trade organizations, and federal agencies. GAO makes no recommendations at this time.

What GAO Found

From 1993 through 2004, overall diversity at the management level in the financial services industry did not change substantially, but some racial/ethnic minority groups experienced more change in representation than others. EEOC data show that management-level representation by minority women and men overall increased from 11.1 percent to 15.5 percent. Specifically, African-Americans increased their representation from 5.6 percent to 6.6 percent, Asians from 2.5 percent to 4.5 percent, Hispanics from 2.8 percent to 4.0 percent, and American Indians from 0.2 percent to 0.3 percent. Financial services firms and trade groups have initiated programs to increase workforce diversity, but these initiatives face challenges. The programs include developing scholarships and internships, partnering with groups that represent minority professionals, and linking managers' compensation with their performance in promoting a diverse workforce. Some firms have developed indicators to measure progress in achieving workforce diversity. Industry officials said that among the challenges these initiatives face are recruiting and retaining minority candidates, as well as gaining the "buy-in" of key employees, such as the middle managers who are often responsible for implementing such programs. Research reports suggest that minority- and women-owned businesses have difficulty obtaining access to capital for several reasons, such as that these businesses may be concentrated in service industries and lack assets to pledge as collateral. Some studies suggest that lenders may discriminate, but proving such an allegation is complicated by the lack of available data. However, some financial institutions, primarily commercial banks, said that they have developed strategies to serve minority- and women-owned businesses. These strategies include marketing existing financial products specifically to minority and women business owners.