Most prominent in this regard is the Basel II IRB approach for risk-weighted capital requirements. The IRB approach, which generally applies in the United States to all bank holding companies with $ billion or more in assets, was developed a decade ago in an effort to align risk weightings more closely to the increasingly sophisticated quantitative risk-assessment techniques in the financial industry.
At the time of its development, the IRB approach seemed intended to result in a modest decline in risk-weighted capital requirements, a goal that the financial crisis revealed to be badly misguided. But even with the higher capital ratios required by Basel III, the IRB approach is problematic.