The FT joins in:

. Do the leading rating agencies meet the credibility, independence, objectivity and transparency criteria demanded by Basel II? Can banks’ internal ratings be trusted? Does anyone know how good or bad they are compared with those of the rating agencies?

Remember that the IRB approach was thought to be more appropriate for large banks because they were more sophisticated in terms of risk management. Do recent loss figures support or contradict that assumption?

We should also ask what models are going to be used to estimate credit risk parameters such as: probability of default, loss given default, unexpected loss and the other host of variables suggested by Basel II. Will the same models be used to rate these securities – the models that were unable to estimate their fair value?

Whatever the answer to these questions one thing is for sure: the first pillar already looks weak. Let us all hope that the two factors (bad ratings and flawed models) that have temporarily brought the alternative banking system to its knees are not going to do the same to the conventional banking system. That would be really scary! Welcome to 2008.