That is why in the United States we are proposing to require only the largest financial institutions to adopt the advanced approaches of Basel II. These institutions understand that complex operations require a more structured and well-defined risk-management framework to monitor the effectiveness of internal control processes and risk exposures.
For these organizations, the incremental cost of adopting Basel II advanced approaches should be relatively modest compared with the significant risk-management investments they have already made. For financial institutions with a simpler organizational structure and less-complex processes and services, a less-sophisticated enterprise-wide risk-management framework is entirely appropriate. For these organizations, the incremental cost of developing advanced Basel II systems can be substantial.