Section 342 of the Dodd-Frank Act directs six federal agencies that regulate financial institutions to establish policies and practices for promoting diversity within those regulated businesses. Last week, the six agencies released joint proposed diversity standards designed to comply with this requirement.

Each of the six agencies has established an Office of Minority and Women Inclusion charged with assessing compliance with the Section 342 requirement. While Dodd-Frank does not establish hiring quotas or affirmative action requirements, the agencies are charged with promoting transparency and awareness of diversity practices in the financial industry.

Basically, the statement requires regulated financial entities to adopt written diversity policies supported and approved by senior management. A member of senior management would be charged with responsibility for implementation of the policy. The policy’s goals are to promote a diverse pool of applicants for employment, facilitate promotion of qualified minority and women employees to senior management positions, and seek diversity in board appointments. Financial institutions would be expected to conduct an internal analysis of existing diversity, as well as develop, implement and periodically assess strategies for overcoming existing barriers to greater inclusion of women and minorities. The standards also call upon these institutions to increase the diversity of their suppliers and contractors.

Financial institutions that are also government contractors should be able to comply with most of these requirements through their affirmative action plans. Many larger regulated companies already have extensive diversity policies and initiatives that should be in line with these new requirements. The agencies will be accepting comments on the proposed diversity standards for 60 days following their upcoming publication in the Federal Register. They should become final some time in 2014.