Graph 1 shows the movements in bank share prices over the past four years and compares them to developments in the rest of the market. It shows that, in most cases, bank share prices have significantly underperformed the rest of the market. Many banks are now trading at a sizeable discount to their book value.
Basel II rests on the three pillars, Pillar I - minimum capital requirements, Pillar 2 - supervisory review process and market discipline as Pillar 3. Pillar 1 – Minimum Capital Requirements For the first time, capital charge for operational risk has been mandated under pillar 1.