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Work is also ongoing to define the appropriate corporate governance and prudential standards to be applied at the financial holding company level. With regard to capital requirements, whether there should be a standard capital rule for all financial holding companies is currently being reviewed. The more important consideration is to minimise excessive leveraging and ensure that the financial holding company has the necessary infrastructure to have an overall view of the risk taking activities within the group. Ladies and Gentlemen,  4  BIS Review 10/2005  It is envisaged that in a more liberalised financial system, market discipline will play a greater role in driving performance in banking institutions. In this regard, shareholders are expected to be more involved in overseeing the performance of banking institutions and the effectiveness of the board of directors and management. The policy on shareholding will therefore be enhanced to promote greater shareholder activism within banking institutions. Shareholders need to be concerned with the practices of banking institutions, particularly those which can have adverse implications on depositors' interests and on financial stability. Similarly, given the increasingly competitive environment, advancement in risk management practices and the strengthened corporate governance framework, a more flexible policy framework on lending to connected parties will be put in place. However, to prevent abuses of such flexibilities, there will be safeguards and conditions that need to be observed by banking institutions.