Double counting of capital within diversified financial groups may be patrolled with more vigour by the banking regulator under proposals to refresh the terms of their supervision.It's not clear to what extent double counting of capital within financial groups is a problem and the discussion paper published yesterday by APRA does not offer any clues.The effect of the proposals from the Australian Prudential Regulation Authority to create a category of supervised institution labelled "level 3" is to provide yet another framework around which to insist the larger financial institutions hold more capital, though how much more is something left unstated by the paper.The definition of a level 3 entity is a "conglomerate group containing two or more material entities".APRA supervision may extend in theory to companies outside of their supervision at the moment. One example of this could be Wesfarmers (the owner of Coles, Bunnings, coal mines, trains, and other bits and pieces) and which also owns Wesfarmers Insurance.The discussion paper suggests that about 10 to 15 groups will be subject to the conglomerate rules, and in essence all of the largest banking and insurance groups.