The control risks relate to Internal Controls Risk, Organisation risk, Management Risk and Compliance Risk. The RBS framework is currently undergoing further refinement. The RBS methodology can be used as a starting point for the implementation of pillar 2 proposals in India. Pillar 3- Market Discipline Regulation is not and cannot be an alternative to market discipline.
Actually, market discipline supplements regulation in the sense that monitoring of the banks and financial institutions is not only carried out by the regulators but also by the markets, which includes other banks & financial institutions, customers, depositors, subordinated debt instrument holders, rating agencies etc. The discipline imposed by the markets can be as powerful as the sanctions imposed by the regulator.