Things to Remember

1. The Basel II framework was developed by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It consists of three pillars: Pillar 1 - Minimum Capital Requirements, Pillar 2 - Supervisory Review Process, and Pillar 3 - Market Discipline.
2. Under Pillar 1, Basel II introduced a capital requirement for operational risk, recognizing the importance of managing this type of risk in banking institutions.
3. The capital requirement for operational risk is calculated based on three methods: the Basic Indicator Approach (BIA), the Standardized Approach (TSA), and the Advanced Measurement Approach (AMA).
4. The capital requirements for credit risk and market risk were not introduced in Basel II. They were introduced in the Basel I Capital Accord and the Basel I Amendment from 1996, respectively.
5. Interest rate risk in the banking book is typically addressed under Pillar 2 of the Basel framework, which deals with the supervisory review process.