While the current Basel I-based rules have served us well for nearly two decades, they are simply not appropriate for identifying and measuring the risks of our largest, most complex banking organizations. Basel I, even when periodically amended, must be straightforward enough for even the smallest banking organizations to implement with relative ease.
Thus, the categories of risk used to determine capital are very broad and are intended to capture the “average” risk levels across the banking system for that generic exposure. Basel I, which has primarily a balance-sheet focus and simple methodology for including off balance-sheet exposures, may be appropriate for most banking organizations.