Looking back at this venture, we can see that three unusual, eventful years have passed since 1 April 2008. The macroeconomic, financial, and also political environments in the euro area and around the globe have been in a state of flux, and sometimes in turmoil.
It did not differentiate enough the risks associated with individual loans, thus providing banks with opportunities for regulatory arbitrage. Basel I, overlooking operational risk, focused on credit and market risk only. These deficiencies demanded an improvement in the Basel standards. After years of intense debates and negotiations, Basel II was finally agreed in 2004.