Basel II likely to boost credit markets, says Fitch

The Basel II capital Accord is likely to boost credit market funding activities, particularly for lower investment-grade companies seeking financing, according to Fitch, the credit rating agency.

Fitch senior director Kim Olson said there should be a shift away from bank loans, with more companies issuing bonds, especially if “there is investor appetite for such exposure”.

Basel II aims to achieve a closer alignment between regulatory capital and underlying economic risk. Current Basel rules impose a flat 8% requirement for all corporate exposures, regardless of risk. Basel II, due for implementation in late 2006, proposes that the level of required regulatory capital should adjust to reflect movements in the level of credit risk.