81. As the primary source of capital, shareholders have a legitimate concern to ensure that their capital is rewarded satisfactorily, but the potential impact of their actions on other interested parties, e.g. customers, depositors and policy­holders, needs to be recognised and understood. For this reason, the Tripartite Group is of the view that shareholders who have a stake in a financial conglomerate (enabling them to exert material influence on a regulated firm within it) should meet certain standards, and that supervisors should endeavour to ensure that this is the case by applying, on an objective basis, an appropriate test, both at the authorisation stage and on an ongoing basis. Exactly what such a test should involve, and whether (and if so how) it should differ from the "fit and proper" test applied to managers was not looked at in any detail by the Tripartite Group. However, there was agreement that the purpose of such a test was to determine a shareholder's suitability. In this respect, it would be important for supervisors to have the power to intervene and to force certain actions if a shareholder passed the test at the authorisation stage, but subsequently proved to be unsuitable. The power to insist on disinvestment, to strip the shareholder of voting rights or to restrict the exercise of those rights would seem to be appropriate, although, it is not always easy to do this where there are 100% or majority shareholders.

82. Depending on the structure of the conglomerate, there will almost certainly be a need for supervisors to liaise closely in assessing the suitability of shareholders. For example, take the case of a parent bank wanting to become the shareholder controller of an insurance company. Under the usual supervisory arrangements, it is clearly the responsibility of the insurance supervisor to assess whether the bank is suitable to be the shareholder controller of the insurance company; the insurance supervisor cannot give away this responsibility. However, the Tripartite Group believes that, in such a situation, the supervisor of the subsidiary company should recognise that the regulator of the prospective parent is likely to be best placed to provide a view on the overall standing of the parent institution in question. It therefore makes good sense to seek such a view and, indeed, to rely on it.

83. A similarly close working relationship is called for where a non­regulated holding company is the shareholder controller of sister companies operating in different supervisory fields. The supervisors involved would each be responsible on a solo level for assessing the suitability of the non­regulated holding company as a shareholder controller. However, the Tripartite Group would expect them to share any information they had on the non­regulated holding company so that it would be unlikely that they would reach differing conclusions as to its suitability.