When the new Basel proposals come into force in 2004, the effects will be felt throughout the financial system. Corporate and sovereign borrowers should see their borrowing costs increase or decrease as a result of the change in bank asset weightings.
But credit analysts are hard pressed to detect any change in debt prices following the release of the Basel proposals on January 16. "The surprising thing in some ways is that there has been little movement in spreads that can be linked to the proposals," says Raj Malhotra, credit analyst at Goldman Sachs in London. "Some of the information was already known and had been factored into bond prices.
But for the most part people are taking a wait-and-see attitude. Slowly, we could see some nuggets come out of the document that make a difference to credit prices."
In the meantime, some of the biggest winners and losers under the new accord are relatively easy to pinpoint.
Winners
Big, prudent banks: Sophisticated banks with relatively sound loan books should see their regulatory capital requirements go down as they are allowed to use the internal-ratings based approach.