In the context of conglomerates, authorization requirements should be utilized as a means to promote transparency and autonomy. Specifically, they provide supervisors a means to implement policies regarding organizational, managerial and financial transparency, and to apply suitability standards promoting the autonomy of directors, managers and external auditors. The process of granting authorization for any regulated group entity should include a group-wide assessment of conformity with these policies.

A number of different types of transactions may be subject to a requirement of prior notification and authorization. These include the establishment of new financial institutions that will incur exposures to the public, the undertaking of certain new activities (e.g. those which substantially alter the business of the institution or require specialized management experience), significant changes in ownership, major corporate transactions effecting the institution's organizational and management structure or substantially changing its business mix, and changes in senior management and external auditors. Requirements for prior notification and authorization also should be applied with respect to parent financial entities {e.g. financial holding companies).

Criteria for granting authorization should include the suitability of significant shareholders, managers and external auditors, the appropriateness and transparency of the corporate structure, the reasonableness of business and financial plans, and the existence of adequate capital. 32/ In assessing the suitability of significant shareholders and managers in a conglomerate context, supervisors should consider whether the managers function, or are likely to function, in a sufficiently autonomous manner. Supervisory expectations in this respect should be communicated or reiterated to significant shareholders and managers as part of the authorization process. In instances involving a substantial expansion of the business or geographic scope of the institution or group, the ability of the board and management to successfully undertake the business challenges of the expansion should assessed. Where the shareholders of the institution seeking authorization are other regulated financial institutions, or entities related by ownership or control to such institutions, the relevant supervisors should jointly assess whether authorization criteria have been met.

The enforcement of suitability standards regarding significant shareholders requires transparency of the ownership of regulated entities. A basic prerequisite for such transparency is the registration of ownership positions, and the prohibition on the use of bearer shares. Legal provisions should also provide for disclosure of beneficial owners when shares are held by agents acting on behalf of others. Regulated institutions should be required to periodically provide to the supervisors a list of significant shareholders and their direct and indirect holdings, and to notify the supervisors upon significant changes in the ownership structure of the institution. Existing shareholders should be required to notify the supervisors when they dispose of significant blocks of shares. While prior authorization powers with respect to parent commercial or industrial entities likely will not be formally available, the authorities should require prior notification by the regulated group members of significant transactions affecting the corporate structure of the group.