Also, the advanced approaches of Basel II better  BIS Review 35/2005  1  align regulatory capital to the risks presented by sophisticated financial instruments and to the complexity of large, internationally active financial institutions. The current Basel I framework is more focused on credit risk for balance sheet assets. But sophisticated financial institutions carry fewer of their potential exposures on their books.
Rather, after credit- and market-risk mitigation, it is often the process of managing risks or laying off exposures that has created earnings surprises in recent years. Basel II is intended to mitigate potential disruptions in banking markets by improving risk measurement and management; establishing a better link between risk and minimum capital ratios; and providing more information to bankers, supervisors, and other market participants.