The need to revise the requirements is the result of an important gap that exists between the present rules and banks’ risk management practices. The average bank of 1988, when the Basel Accord was adopted, is a very different animal compared with the average bank today.
Globalisation, the shift towards market-based financing and the speed of financial innovation have all significantly changed banks’ risk profile. The current Accord, which is based on a simple scheme of very broad risk categories, hence needed to be revised.