On Basel III and the difficulty of self regulation

With the so-called Basel III regulations, the G20 central banks are looking to upgrade the Basel II accord in the light of the crisis of the last two years. One of the biggest outstanding issues, is the risk weights assigned to sovereign debt, which remains more or less as before. The risk weights for sovereign debt denominated in foreign currency is based on the sovereign credit rating: AAA to AA (0 per cent risk weight), A+ to A- (20 per cent risk weight), BBB+ to BBB- (50 per cent risk weight); and BB+ to B- (100 per cent risk weight).


Now given that

1) credit ratings are no longer the touchstone of fiscal probity they once were and

2) the central banks are themselves looking to raise capital in the global markets, so lower risk weights make that debt more attractive, and

3) it looks like the world will soon be faced with an impending sovereign debt crisis as government deficits become less and less sustainable.

Does this really make sense that Basel III facilitates the governments funding quite so (L)iberally?