Also, the capital shortfall refers to the end of the transition period, which is nine years away. Most banks should be able to earn their way out of potential shortfalls. To sum up, Basel III preserves risk sensitivity in a sensible way.
This is even more important as increasing firm-specific risk may require larger portfolios and a greater range of exposures than before. Another fundamental issue is that technological change challenges the reliability of backward-looking indicators (such as default histories) for credit risk assessment.