12/08/2013 07:40 BST | Updated 12/08/2013 07:45 BST

Women In Boardrooms: City Firms Could Be Forced To Set Female Targets

Banks, building societies and insurance companies will be forced to set quotas for the number of women in their senior management and release their diversity policies, in proposals being put forward by City regulators.

The Prudential Regulation Authority, which oversees financial services companies, has put forward the idea as part of a wide-ranging consultation on how to implement an EU directive, which also requires banks to shore up more capital and cap banker bonuses.

The PRA said firms needed to "put in place a policy promoting diversity on the management body; the nomination committee must also establish a target for gender representation on the management body".

"This is intended to improve diversity within firms' management bodies," it added.

Linda Jones, employment partner at Pinsent Masons, said the gender quotas would be the type of regulation of its kind to be introduced in the UK.

“The regulations will not prescribe what the targets should be, but they will have to be published and businesses will no doubt be wary of publishing targets that seem too lacking in ambition."

"While the requirement only applies to financial institutions at the moment, it may be a taste of things to come for other large businesses," she said.

The targets will apply to larger institutions, but all firms regulated by the PRA and Financial Conduct Authority regulator will be required to publish a diversity policy setting out how they promote diversity in their senior management.

"These proposals, which emanate from an EU directive, represent a step change for financial institutions," Jones said.

The EU proposals, known as CRD IV, have been in development last year in Brussels amid concerns that firms were failing to appoint enough women into top positions.

Earlier this year, a new report found that progress by companies in appointing more women onto company boards had stalled.

The annual Cranfield Female FTSE board study showed that in the six months from last March the pace of change was "extremely encouraging", with 44% of new appointments going to women, and 36% in companies in the FTSE 250.

But the levels were short-lived, dropping to 26% and 29% in the past six months, showing a "considerable gap" from the recommendation of having 25% of women on boards by 2015, made by a Government-commissioned review led by Lord Davies of Abersoch.