Basel II

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A second agreement developed by the Basel Committee on Banking Supervision in 2004 to promote international standards for measuring and ensuring the adequacy of a bank's capital.

The Basel Committee issued a compilation of Basel II and related guidance 2006.

Basel II was implemented across the European Union (EU) in 2008.

The changes introduced by Basel II included:

  • Refinements to the measurement of credit risk;
  • Quantifying the measurement of operational risk;
  • Permitting the use of banks' internal risk models, subject to regulatory approval; and
  • The concept of the Three Pillars of Capital.

(Basel II is occasionally written as Basel 2.)

Basel II was updated with effect from the end of 2011, in respect of the capital requirements for market risk and re-securitisations.

These updates are commonly known as 'Basel 2.5'.

See also