1. To ensure that supervisors of entities within a financial conglomerate are able to exercise their responsibilities to assess whether those entities are soundly and prudently managed and directed and whether key shareholders (as defined below) are not a source of weakness to those entities.

2. To promote arrangements to facilitate consultation between supervisors and the exchange of information on individuals and regulated entities, on a case-by-case basis, when requested by other supervisors, to achieve the objective set out above.

Background

3. The probity and competence of the top management of banks, securities firms and insurance enterprises are critical to the achievement of the objectives of supervision. The primary responsibility for ensuring that regulated entities are prudently and soundly managed and directed rests with the regulated entities themselves. Supervisors' expectations are that the entities will take the measures necessary to ensure that managers, directors and shareholders whose holdings are above specified thresholds or who exercise a material influence on their operations ("key shareholders") meet the fitness, propriety or other qualification tests of their supervisors.

4. An effective and comprehensive supervisory regime should include controls designed to encourage the continued satisfaction of the fitness, propriety or other qualification tests of supervisors and to allow supervisory intervention where necessary. The application of such tests for managers, directors and key shareholders is a common regulatory mechanism for supervisors to ensure that the institutions for which they have supervisory responsibility are operated in a sound and prudent manner. Supervisors generally have at their disposal various sanctions to ensure remedial measures are taken in respect of managers, directors and key shareholders who do not meet the relevant fitness and propriety or other qualification standards.

5. Solo supervisors are subject to statutory and other requirements in applying fitness, propriety or other qualification tests to the entities under their jurisdiction. It is not intended that such statutory and other requirements (as well as their procedures for the application of those tests) will be superseded by the elements of this principle. In exercising their statutory responsibilities, supervisors should consult, as applicable, the supervisors of other regulated entities in the financial conglomerate in question.

6. The organisational and managerial structure of financial conglomerates adds elements of complexity for supervisors seeking to ensure the fitness, propriety or other qualifications of the top management of regulated entities as the management and direction of such entities can be influenced by individuals who may not be managers or directors of the regulated entities themselves or of any regulated entity in the group.