Since liquidity risk, if left unaddressed, could cascade into a solvency risk, this proved to be the undoing of virtually every bank that came under stress in the depth of the crisis. 10.
Finally, Basel II was also seen to be guilty of focusing exclusively on individual financial institutions, ignoring the systemic risk arising from the interconnectedness across institutions which, as we now know with the benefit of hindsight, was the culprit for ferociously spreading the crisis across financial markets. 11. Is all this criticism against Basel II valid? As I said before, only partly valid.