Evaluating the soundness of banks through the Camel rating model

Abstract

The purpose of CAMEL ratings is to determine a bank’s overall condition and to identify its strengths and weaknesses-Financial, Operational and Managerial. Each bank is assigned a uniform composite rating based on five elements. The system provides a general framework for evaluating the banks. The model takes into consideration capital adequacy, asset quality, management capability, earnings capability and liquidity.