75. Most supervisors already have the power to check the fitness and propriety of the managers of the firms for which they are responsible. However, managers of other companies in the conglomerate, generally upstream from the regulated entity, may be able to exercise control, either directly or indirectly, over many aspects of the regulated firm's business. In particular, some supervisors harbour concerns that, as the banking, securities and insurance industries become more integrated, so the decision-making processes within a financial conglomerate could be shifted away from the individually regulated entities themselves to the parent or holding company at the top of the group structure. Group management at parent or holding company level can play a key role not only in devising the strategic objectives of a group but also in controlling the risks carried by the individual companies throughout a group. It would not be inconceivable for management at holding company level to influence policy in such a way that it became difficult for a supervised entity to comply with supervisory requirements or to maintain supervisory standards.

76. The Tripartite Group has no wish to usurp the prerogative of boards of directors to make key management changes at group level. However, supervisors have a responsibility to ensure that management of supervised entities is carried out by people whom they regard as fit and proper. If management is undertaken by people who are not in fact part of the supervised entity, there would seem to be a strong case for giving supervisors the powers to extend application of the fit and proper test to all managers who are in a position to exert a material influence on a supervised entity within a financial conglomerate (where necessary, including managers at non­regulated holding company level). In other words, supervisors would "look through" a conglomerate's legal structure and focus on the people who are actually managing the supervised entity, regardless of exactly where they featured in the group's organigram.