The supervisor’s duties as part of the supervisory review process include:

• Check compliance with Pillars I and III of the Basel II Accord, which would include credit risk mitigation and transparency requirements.
• Review internal control systems.
• Assess internal capital management methods employed by the bank.
• Assess risks not adequately addressed under Pillar 1.

Note that the IRB approach for retail exposures is distinct from other IRB approaches in that there is no foundation approach and that PD, LGD, and EAD estimates are all determined by the bank. Also, the impact of interest rate risk on the bank’s capital position must be assessed by determining the impact of a 200 basis point shock.