In 1999, the Basel Committee on Banking Supervision (BCBS) released Basel II, a set of rules for regulating the activities of banks, for example by defining new risk management practices, and by imposing certain capital requirements.
Basel II was later revised in 2001, 2003, 2004 and 2005. The implementation began in 2007.

The aims of Basel II were/are:

• To guarantee a more risk sensitive allocation of capital.
• To improve the efficiency and the transparency of markets.
• To provide common guidelines for the management of risk.
• To reduce regulatory arbitrage among countries, by attempting to make international regulations more uniform.

In this course, we discuss Basel II, its three-pillar construction and the main approaches to credit risk in this framework.

Many of the concepts we introduce in this lesson (RWA, STA, F-IRB, A-IRB) will become clearer next week, when we will discuss them in more details.
For the moment, just try to understand the big picture.