The main challenges that financial conglomerates pose for regulators are: •  First, unless there is strict implementation of sound banking practices, there is a danger that a bank can become a cheap source of finance to the other members of a group without proper recognition and management of the risks involved.
•  Second, failures elsewhere in the group can expose the bank to contagion risk. •  Third, especially where the conglomerate group includes commercial businesses, there is a risk that the bank depositors end up carrying the residual risk for nonfinancial businesses. Regulators address these concerns through consolidated supervision which places a supervisory net around all members of the group.