As investors around the world cope with the fallout of the sub-prime mortgage crisis in the United States, financial institutions are getting a stern regulatory reminder of the importance of monitoring operational and credit risk, via the implementation of Basel II.
Named after the Swiss city where it was hatched, Basel II spells out three pillars of risk management for financial companies: establishing minimum capital reserves to offset financial risk; creating a system of supervisory review; and maintaining market discipline to promote greater stability in the world financial system.
