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CAMELS Rating

CAMELS Rating. Capital Adequacy Weight 25% Asset Quality 25% Management 25% Earnings 10% Liquidity 10% Sensitivity to Market Risk 5% Rank 1 to 5; 1 is the best

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CAMELS Rating

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  1. CAMELS Rating Capital Adequacy Weight 25% Asset Quality 25% Management 25% Earnings 10% Liquidity 10% Sensitivity to Market Risk 5% Rank 1 to 5; 1 is the best Qualitative 70% and Quantitative 30%

  2. CAMELS Capital Adequacy Asset Quality Management Earnings Liquidity Sensitivity to Market Risk

  3. Capital Adequacy Capital Adequacy Ratio Core Capital Adequacy Ratio Actual Provisioning to Required Provisioning Earning after Tax to Core Capital Capital plan, dividend payout ratio, public confidence, core deposits etc

  4. Asset Quality Past Due loans to Total Loans Non Performing Loan to Total Loan Provision to NPL NPL Ratio to Avg Industry NPL Ratio Loans to a Single Sector to Core Capital Investment in Securities of a Company to paid up capital of a company Investment in Securities of a Company to Core Capital of a bank Quality of lending/investment policy, policy implementation, loan to directors, CRM techniques

  5. Management Qualification of Directors and Senior Management Ability to plan and respond to Changes Continuity/Succession Ability to meet the needs of the society Compliance with laws/regulations Internal Control System Working Relationship

  6. Earnings Return on assets Return on equity Interest spread Contribution/burden Quality and stability of earnings, dividend stability

  7. Liquidity Net Liquid Assets to Deposit CRR SLR Liquidity Mismatch Bank’s access to interbank market, quality of assets and liabilities, contingency plan

  8. Sensitivity to Market Risk Interest rate Gap to total earning assets Net forex position to core capital Investment in securities to total earning assets Effectiveness of ALCO, IMC, Treasury

  9. Composite Rating Capital Adequacy….x 0.25 = Asset Quality …..X 0.25 = Management…………X 0.25= Earnings …..x 0.10 = Liquidity ….x 0.10 = Sensitivity to market risk….x 0.05=

  10. Global Economic Crisis If your neighbor loses a job, it is aSLOWDOWN If you lose a job, it is aRECESSION If an Economist loses a job, it is aDEPRESSION Derivative: A financial weapon of Mass Destruction Warren Buffet

  11. Thank you!!

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