From the point of view of the banking and financial system as a whole, adequate capital is essential for the system to be able to withstand the stresses that arise from the ups and downs of the economy, including extreme stresses - such as the failure of one or more financial institutions - that may be associated with large and widespread unexpected losses.
Basel II brings together improvements in the regulation of bank capital distilled from many years of experience under Basel I, the first international Accord on capital adequacy agreed by the G10  1  The Basel II framework has been promoted internationally by the Basel Committee on Banking Supervision (BCBS), a committee of senior banking supervisors from the G10 countries.