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RATING IMPLICATIONS OF BASEL II ON BANKS

Info-Prod Research (Middle East), November, 2003

Moody's Investors Service says the ratingimplications of Basel II on Australia's banks are likely to be gradualand subtle, but will probably favour the larger institutions in thelonger-run. "At the margin, it seems likely to be neutral to positive for thecountry's larger banks, and to place somewhat of a cap on the positiveratings trend enjoyed by the system's smaller institutions over the lastfew years," Moody's says in a new report.

However bank regulators' indications that they desire to maintain a "level playing field" in Australia's banking system, and that they arenot prepared to see rapid capital reductions, suggest that the immediateimpact of Basel II on relative competitive positions will be muted. More broadly, Basel II -- because it promises to increase...

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