And with the advent of Basel II, which is intended to update capital rules for large, internationally active U.S. banking organizations, supervisors must become even more involved in understanding emerging sound practices in risk measurement and management. BIS Review 25/2006  1  One of the most important sound practices for a banking organization is the tying of risk exposures to capital.
Banks that use similar risk models can have very different risk exposures. That is why the Basel II approach to capital is so important. Basel II provides a framework in which the risk level banks choose to accept is reflected in their capital. Banks with higher loss exposures will be required to hold more capital than those who have lower risk appetites.