Basel I served banking industry well since its introduction in 1988 but it lagged behind the financial market developments and innovation. It increasingly became outdated and flawed as it relies on a relatively crude method of assigning risk weights to assets, emphasized mostly balance sheet risks relative to multiple risks facing financial firms today.
Furthermore, it offered a regulatory approach to capital determination and standard setting which did not capture fully the range of large and complex banking operations and the accompanying range of diverse set of economic risks.