What is the purpose of Pillar II?
Pillar II outlines the framework for the supervisory process and the framework for banks’ internal capital adequacy assessment process (ICAAP). A bank is exposed to a number of risks, and they are not limited to the risks that are quantified under Pillar I (credit, market and operational risks). Pillar II therefore covers banks’ risks in a broader sense, such as business, pension, concentration, correlation and migration risks as well as banks’ situation and expectations in general. Pillar II also covers stress testing.
Pillar II outlines the framework for the supervisory process and the framework for banks’ internal capital adequacy assessment process (ICAAP). A bank is exposed to a number of risks, and they are not limited to the risks that are quantified under Pillar I (credit, market and operational risks). Pillar II therefore covers banks’ risks in a broader sense, such as business, pension, concentration, correlation and migration risks as well as banks’ situation and expectations in general. Pillar II also covers stress testing.
