Basel II report

Why it matters

Basel II was created to promote greater consistency in the way banks and banking regulators approach risk management across national borders. Basel II defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Although the risks apply to any organization in business it is of particular relevance to the banking regime where regulators are responsible for establishing safeguards to protect against systemic failure of the banking system and the economy. The Basel II framework is intended to promote a more forward-looking approach to capital supervision, one that encourages banks to identify the risks they may face, in the present and in the future, and to develop or improve their ability to manage those risks.