We also hope that the added transparency contained in Pillar 3 of Basel II will generate improved market discipline for these large organizations. Market discipline is not possible if counterparties and rating agencies do not have good information about banks' risk positions and the techniques used to manage those positions.
Indeed, market participants play a useful role by requiring banks to hold more capital than implied by minimum regulatory capital requirements, or sometimes their own economic capital models, and by demanding additional disclosures about how risks are being managed.