Given the dearth of external ratings, banks will reap the full benefit of the new Basel II regime only when they can apply the advance approaches based on internal credit ratings. For this they need further improvements in their risk management systems.
To push the reforms, SBP has made it mandatory for banks to carry out internal risk ratings though banks will be provided lead time for implementation. The application of the basic Basel II approaches is not likely to result in any major change in banks’ capital adequacy ratios (CARs).