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The Essentials of Risk Management, Second Edition, 2nd Edition by Robert Mark, Dan Galai, Michel Crouhy

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Appendix 3.3

BASEL II AND MINIMUM CAPITAL REQUIREMENTS FOR CREDIT RISK

The Basel II framework maintained both the wide definition of capital employed by Basel I and the minimum capital requirement of 8 percent of risk-weighted assets (though these decisions were undermined by the 2007–2009 financial crisis and have been altered in Basel III). However, Basel II made two key changes with regard to minimum capital requirements.

First, the regulators extended the risk calculation to include both market risk (i.e., incorporation of the 1996 Amendment on market risk) and operational risk:

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where risk-weighted assets are the sum of the assets subject ...

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