Credibility of credit rating agencies and Basel-II

With the US sub-prime crisis, the leading credit rating agencies namely S&P and Moody's are increasingly under scanner for their credibility and methods.

Basel-II accord is all set to roll out by next year in most western countries. The accord is supposed to reflect credit-quality gradation or asset quality deterioration of a security, loan etc. Noteworthy point is that the accord depends heavily on the credit ratings given to the loans, securities etc. by the credit rating agencies.

If the rating agencies are themselves not reliable (or lose their reliability) then how can the financial institutions adopt Basel-II which is costly to implement and still may not provide adequate risk cover.