In view of this, Basel II needs to de-emphasise rating for assigning capital charge for credit risk by banks. Indeed, if anything, given the tremendous volumes and liquidity of credit derivatives in general and of CDSs (both single-names and indices-based), it would be more market-price discovery-driven for banks and supervisors to rely on prices backed out from these.
Indeed, CDSs price credit risks almost on real-time basis as much as US Treasury, foreign exchange, stock and commodities, markets do. Credit Rating agencies, in comparison, are much more lagged.