New bank regulations to revolutionize risk management and capital requirements.
The 2004 Basel II framework changes how banks are regulated, moving towards a more flexible and risk-focused approach. It introduces new rules for operational risk and a three-part system for setting capital requirements. Banks can use their own models or regulatory ones to calculate how much capital they need, depending on the risk level. This framework will push banks to adopt more risk-sensitive methods in the future, based on their business complexity and risk management skills.