However, banks need to ensure that expenditure incurred by them to improve their risk management systems, IT infrastructure, core banking solutions, risk models etc. should not be included as Basel II  2  BIS Review 54/2006  compliance costs, since these are expenses which a bank would incur even in the normal course of business to improve their efficiencies.
Operational risk Operational risk was one area which was expected to increase capital requirement for the banks. The Reserve Bank had announced in July 2004 that banks in India will be adopting the Basic Indicator Approach for operational risk.