The Credit Risk (the risk of default by the counterparty) is dealt with most comprehensively in the Basel II in line with legacy of the first Accord as well as the banks traditional edge and competence in credit risk assessments.
The inclusion of Operational Risk, a fundamental improvement over Basel I, captures risks associated with bank’s internal control processes and systems and corporate governance policies and practices. Operational risk calculation explicitly requires capital for “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events” risk. This definition includes legal risk, but excludes strategic and reputational risk.