Basel II was a response to shortcomings in the original Basel Accord (Basel I, 1988). In particular, Basel II revised the framework of Basel I to adopt more risk-sensitive minimum capital adequacy requirements that take into account:

I. increased credit risk.

II. market risk associated with off-balance sheet trading activities.

III. operational risk, such as computer failure and fraud.

Which of the following is correct?

Multiple Choice

• I, II, and III.

• I only.

• II and III only.

• II only.

• III only.