Basel II
| Basel Framework International prudential standards for banks |
|---|
| Background |
| Pillar 1: Regulatory capital |
| Pillar 2: Supervisory review |
| Pillar 3: Market disclosure |
| Business portal |
Basel II is a framework on banking regulations published by the Basel Committee on Banking Supervision in June 2004 to determine the minimum capital that banks should hold to guard against the financial and operational risks. It superseded Basel I and was extended and partially superseded by Basel III.
The regulations aimed to ensure that the more significant the risk a bank is exposed to, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability. Basel II attempted to accomplish this by establishing risk management and capital management requirements to ensure that a bank has capital adequacy for the risk the bank exposes itself to through its lending, investment and trading activities. One focus was to maintain sufficient consistency of regulations so to limit competitive inequality amongst internationally active banks.
Basel II was implemented in 2008 in most major economies. The 2008 financial crisis intervened before Basel II could become fully effective. As Basel III was negotiated, the crisis was top of mind and accordingly more stringent standards were contemplated and quickly adopted in some key countries including in Europe and the US.