Basel II refers to the second of a set of international banking rules passed by the Basel Committee on Banking Supervision.Published in 2004, Basel II focused on strengthening the capital requirements of banks by establishing three goals: Make a bank’s capital more risk sensitive Promote enhanced risk management tactics among larger banks Create a common means for evaluating banks from one country to another Basel II created standards and regulations on the amount of capital financial institutions must put aside. The risk of all the investments banks make was to be weighed when determining a bank’s capital requirements. The greater the risk it took on, the more capital required in reserve. Basel II also identified three pillars for evaluating bank performance: Calculate minimum capital requirements Identify risk factors not captured in Pillar 1 Assess information pertaining to risk management and distribution Minimum capital requirements were required to reflect credit risk, which is the credit rating of the parties to whom the bank loans money. The pillar also reflected market risk, which focused on a bank’s other investments. And it considered operational risk, which weighed non-financial factors like theft or natural disaster. The 2008 financial crisis struck before Basel II could take full effect. The committee responded to criticism of Basel II and deficiencies in financial regulation by revising its standards and publishing Basel III, which was created to strengthen bank capital requirements and increase liquidity.