Building a capital plan

Banks are required under Basel II to have a process in place for assessing their overall capital adequacy in relation to their risk profile. Bernard Manson and Christopher Hall outline how to construct a capital plan to ensure minimum capital requirements are not breached

Generally, banks have made good progress in implementing the number-crunching requirements of Pillar I of the Basel II capital framework, but are further behind in addressing the more subjective and management-process aspects of Pillar II, which covers supervisory review. Part of this is caused by the need for the quantitative risk teams to be able to present their analysis in very simple