In addition, supervisors should be in a position to provide constructive feedback to bank management on these internal assessments, or "economic capital", based on their knowledge of industry practices at a range of institutions. Finally, Pillar III seeks to complement these activities with market discipline by requiring banks publicly to disclose key measures related to their risk and capital positions.
The concept of these three mutually reinforcing pillars has been key to the Basel II effort. Pillar I: Minimum regulatory capital requirements The minimum capital requirements for credit risk under the A-IRB approach are built around the same concepts that underlie all modern portfolio-based methods for systematically measuring credit risk.