2 Show Me the Money: The Purpose of Economic Capital To establish an economic capital framework, which encompasses the total of models, systems, data, policies, knowledge, and applications related to eco- nomic capital, takes a significant investment. Hence, the natural question is what the return on the investment will be. Is investing in an economic capital framework a good investment? The simplest answer would be that it is an accepted way to meet a regulatory requirement, whatever the other merits and costs may be. Under the Basel II Accord, regulators require banks to assess their capital position in relation to the risks to which they are exposed. This is referred to as the Internal Capital Adequacy Assessment Process, or ICAAP. In the ICAAP, economic capital is an accepted (and generally considered a best practice) measure to assess capi- tal, but regulators have stopped short of making it mandatory. For example, the US regulators state explicitly in their guidance for Basel II that "economic capital is not the only means to meet the ICAAP requirement." 1 The European