Several options – the Simple Standardized, the Standardized, Foundation and Advanced approaches – have accordingly been formulated in the menu of options available to accommodate a progressive adoption of Basel II. One of the direct impacts of Basel II adoption will be the wide scale use of quality information, data warehousing and credit risk modelling with a view to improving risk management by banks.
Whichever approach is adopted, the regulator and the external auditor as well as Board and Management of banks, all have a duty to exercise oversignt over the processes of capital determination and, hence the precise risks being taken necessitating specific capital charges.