Consequently, we may see Basel II implementation as a part of a spectrum of frameworks within which there can be progressive enhancement of quality amongst different categories. It is likely that on implementation of Basel II, some banks might adopt the IRB Approach for credit risk while some other banks in the same jurisdiction, might adopt the Standardised Approach.
Since the IRB Approach is more risk sensitive vis-à-vis the Standardised Approach, a small change in the degree of risk could result in a large additional capital requirement for the banks following the IRB approach - which would dissuade such banks from assuming high-risk exposures.