Risk Based Regulation

Basel I did not know that the capital a bank must be connected with the credit standing of:
- Borrower
- Publisher securities
- Other parties who have financial obligations to the bank (eg a guarantor)

Broadest category of others who use Basel I and sensitivity to the process simple add-on for counterparty credit risk, limit the scope of risk based regulation.
Market Risk Amendment Var model that uses the first element of risk based regulation → an early step in a major development of risk-based regulation.