Banking Sector today is in under immense pressure to sustain economy and improve regulatory measures. BASEL I or BASEL Accord was introduced and published in 1988 and implemented in the following years but it has its own short comings and limitations. Now State Bank of Pakistan has asked certain banks and DFI to implement BASEL II (June, 2004). This research aims to see whether implementation of BASEL II affects the profitability of banks in Pakistan. The cost of implementation is quite high and most of the banks would be asked to increase their capital levels. It is found that efficiency...