Basel II is a more flexible framework than Basel I and is intended to better permit capital regulation to keep up with financial market innovations in the future.
18 Research shows that benefits are eroded if people use rules of thumbs to form expectations  (Renewal of the Inflation-Control Target: Background Information—November 2011), or if they doubt that the policy-maker will fully commit to maintaining a level path (G. Cateau and M. Shukayev, “Limited Commitment, Endogenous Credibility and the Limits of Flexible Price-Level Targeting,” Bank of Canada Staff Working Paper, forthcoming).