This has laid the foundations of a very long-drawn process for Basel II, which recognizes the perceived shortcomings of Basel I and progressively addresses its inherent weaknesses, while gearing the risk management framework for the emerging financial engineering and innovation. Basel II Accord, first of all, aims to align banks’ capital with their basic risk profiles.
It is very elaborate and far superior in terms of its coverage and details. It exploits effectively the new frontiers of risk management. It seeks to give impetus to the development of a sound risk management system which hopefully will promote a more efficient, equitable and prudent allocation of resources.