It is inherently less transparent than Pillar I because outsiders will not know which portion of a bank's excess capital is deemed "necessary" to address a particular risk specific to the bank and which portion is truly an "extra" cushion.
It is also more difficult although not impossible - for supervisors to require an uncooperative bank to hold Pillar II capital than rule-imposed Pillar I capital. Pillar III: Market disclosure Basel II seeks to minimize the public difficulty of interpreting capital ratios by requiring public disclosure of considerable quantitative and qualitative information, including, in effect, the risk inputs I described earlier.