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I was reading Basel II wiki page, it says:

The first pillar

The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk, and market risk. Other risks are not considered fully quantifiable at this stage.

The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized approach, Foundation IRB, Advanced IRB and General IB2 Restriction. IRB stands for "Internal Rating-Based Approach".

Any idea what is such “General IB2 Restrition”? I checked the Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework, Comprehensive Version (BCBS) (June 2006 Revision) but couldn't find any definition.

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Islamic Banking (IB) has a different view on financial risk: The required minimum share holders equity must be lower than for counterparties in conventional banks because credit risk is also shouldered by unrestricted deposits owners, as the IB gives autorisation to use them in investments at its own discretion.

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  • $\begingroup$ thanks for the comments, if Islamic Banking is IB, then what does IB2 mean? $\endgroup$ – athos Aug 11 '14 at 12:03
  • $\begingroup$ It should specify the Basel 2 requirements, as Basel 3 has a very consistent and self-explanatory section on IB. $\endgroup$ – user7056 Aug 20 '14 at 0:54

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