A number of banks have suggested that their ideal Basel II capital rule would allow them to mix and match elements of both the standardized and advanced approaches-perhaps the standardized approach for wholesale and retail credits, the AMA for operational risk, and the expected positive exposure approach for derivatives and securities financing transactions.
Allowing such customization or cherry-picking, where a bank is allowed to select a different approach for each portfolio in order to minimize its aggregate capital requirement, could materially weaken the regulatory capital framework for U.S. banks and, along with it, the effectiveness of prompt corrective action policies.