This paper has dealt extensively with the concept of "consolidation". This concept is operative on three different levels: prudential regulation, accounting and supervision. In some countries the relevant group for each purpose may be identical, but in others it will vary. The authorities need to find a means to apply prudential regulation to most or all the financial entities within the group, either by modifying existing regulations applicable to different types of financial institutions, or preferably, by adopting uniform regulations applicable equally to the relevant consolidated group, and individually to all types of institutions. An important advantage of uniform prudential regulations is that they can promote competition by establishing a more level-playing field among institutions and financial organizations. Group accounting consolidation is a prerequisite for the use of uniform prudential regulations, and serves to promote transparency by improving the information content of supervisory reports and public disclosures. The scope of consolidated supervision must be at least as great as that for prudential regulation and consolidated accounts. Often it will be applied more broadly, since it must include some form of risk assessment of all group entities, including unregulated financial institutions and entities engaged principally in commercial or industrial activities.

Authorization criteria will need to be adapted for the conglomerate context. Suitability standards for principal shareholders, key directors and managers, and external auditors will need to be applied on a group-wide basis when making decisions regarding new entrants and the expansion of existing institutions. Principal shareholders will need to be held to standards regarding their objectives and financial condition, and managers will need to be held to standards regarding their integrity and professional experience. The parties responsible for each regulated entity need to have sufficient autonomy within the group managerial structure so as to be able to fulfill their responsibilities toward the individual institution and its supervisors.

The implementation of an enhanced regulatory and supervisory framework is dependent on the effectiveness of the supervisors. To promote effectiveness, the authorities will need to reassess the structure of the financial sector supervision function, and ensure that the responsible agencies coordinate their activities. At the agency level, supervisory policies and procedures will need to be modified. Policies affecting staffing, training, compensation. and the use of technology will need to be reassessed.