The Bank of Queensland's new chief executive, Stuart Grimshaw, defended the bank's strategy and its balance sheet strength in response to this week's ratings downgrade by Standard & Poor's.Speaking at the bank's annual general meeting yesterday, Grimshaw said: "The main issues S&P has flagged as negatives are around our inability to compete with the major Australian banks, lack of geographic diversification, the level of bad debts and our overall relevance to the financial services sector."While S&P is telling us we need to be more diversified, I do not believe that should be the case. Last time I looked, Queensland was larger than most European nations and I don't see S&P telling their banks to diversify geographically; in fact, the exact opposite. "We continue to expand in Queensland and also out of state, but our comparative advantage is that this is our home state and this is where we need to be much stronger."Grimshaw said access to funding would remain a critical strategic issue for all banks. However, Bank of Queensland relies on the international capital markets for only 1.5 per cent of its total funding, he said."While we have, disappointingly, been downgraded by S&P to BBB [from BBB+] there will not be any material impact on us," said Grimshaw. "Our funding book is well under control. We don't have to pursue unsecured debt funding this financial year."BOQ's expansion into capital-lite businesses, such as St Andrews Insurance, while also seeking higher margin business in our expanding vendor finance, equipment finance and debtor finance business lines, means that we are doing well in these uncertain times."