The new framework will enable bank regulatory capital ratios to be more responsive to changes in risk and will foster additional disclosures by banks about their risk-measurement and management systems. And even though minimum regulatory capital ratios are likely to be more volatile under Basel II, this reflects greater risk sensitivity.
Who else has similar exposures and might be vulnerable to further changes in asset prices that could be triggered by a firm’s failure and unwinding of positions? How long are the financial disruptions likely to last? Are substitute providers of financial services available, and how easily and quickly can they be employed?