Read about the CAMELS rating system.
In a 2 page analysis report critically review the CAMELS rating system for assessing bank performance. Also explain why it is fast becoming a global standard adopted by central banks. Do you believe this is the correct tool to use for evaluating banks? Support your position with justifications and examples© BrainMass Inc. brainmass.com October 25, 2018, 1:54 am ad1c9bdddf
The CAMELS rating system uses six factor to evaluate banks. The six factors are capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market risk. The bank supervisory authority assigns a score on a scale of one (highest) to five (lowes0 for each factor. If the bank has a score of less than two it is considered to be positive, however, a score greater than three is frowned upon.
The CAMELS rating system has several shortcomings. The system gives equal weight to each of the six factors. This is not in accordance to the real life situations. To get the correct picture of bank performance different weights need to be attached to different factors. For instance, sensitivity to market risk and capital adequacy cannot be assigned the same weight under all conditions. In addition, the fact that supervisors assign rating values to each factor makes the ...
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FDICIA and Defacto Insure
1. Give a brief description of FDICIA and discuss the meaning of defacto
insure? Under the guidelines of FDICIA what new role does capital play?
2. What is meant by prompt corrective action and how is it implemented in the current regulatory environment. What role does capital play in prompt corrective action? Also, how do we categorize capital under this approach and how do we know the wire has been "tripped". Also what is meant by CAMEL. Please be very specific.
3. What are the 3 pillars of BASEL II? what are the two approaches are put in place regarding credit risk and capital for large international banks Under Basel II? Please provide an example of the use of market discipline under Basel II and please explain the difference between market discipline from the bond and equity markets. How is market disclosure differing from market discipline?View Full Posting Details