Umbrella Supervision The Congress, in its review of financial modernization, must consider legal entity supervision alone versus legal entity supervision supplemented by umbrella supervision. The Board believes that umbrella supervision is a realistic necessity for the protection of our financial system and to limit any misuse of the sovereign credit, that is, the government’s guarantees that support the banking system through the safety net.
The bank holding company organization increasingly is being managed so as to take advantage of the synergies between its component parts in order to deliver better products to the market and higher returns to stockholders. Such synergies cannot occur if the model of the holding company is one in which the parent is just, in effect, a portfolio investor in its subsidiary.