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FRB: Speech, Olson--Basel II--May 16, 2005 (2926 words) |
 | Basel I presents an opportunity for banks to retain balance-sheet positions that are of higher risk than their regulatory capital charge and to shed those of lower risk. |
| Basel II is intended to close this gap by more directly linking riskiness of assets to their corresponding regulatory capital charge and to reduce, if not eliminate, the incentives to engage in capital arbitrage. |
| Basel II also creates a link between regulatory capital and risk management, especially under the advanced approaches, which are the only ones expected to be applied in the United States. |
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