Camel Rating Model and Financial Stability of Commercial Banks in Kenya

isara solutions, 2019

Banking sector is the key element in the financial sector and determines development of any country’s economic success. This paper aimed to analyse the financial performance of Ethiopian commercial banks by using CAMEL framework and to rank the banks according to their performance. Census sampling method were used and 15 banks were considered for the study. For measuring performance of the banks data was collected from National Bank of Ethiopia for the period of 2012 to 2017 and ROA and ROE are considered as dependent variables and, Capital adequacy, Asset quality, Management efficiency, Earning ratio and Liquidity ratio were considered as independent variables. Descriptive analysis were conducted by using ratio analysis and econometric analysis were conducted by constructing regression model by using e-views 9 software. The regression result for ROA is explained by independent variables is 62.11 percent, and ROE is explained by independent variables is 82 percent. Capital adequacy, asset quality, management efficiency are significant variables whereas the earning ability and the liquidity position ratios are insignificant in both models.

Research Journal of Finance and Accounting, 2020

A stable banking sector is significant in ensuring economic growth as well as sound, efficient and stable financial system. However, the banking sector in Kenya has been considered fragile and this is evident from the increasing trend of non-performing loans, fluctuating deposit trend of some commercial banks and fluctuations of foreign liabilities in commercial banks in Kenya, which is associated with financial stability. Furthermore the collapsing of some commercial banks and some being put under receivership is of great concern to the financial stability of the commercial banks in Kenya. The general objective of the study was to establish the effect of CAMEL variables on financial stability of commercial banks in Kenya. The specific objectives of the study were to determine the effect of operational efficiency, capital adequacy, bank liquidity, profitability and asset quality on financial stability of commercial banks in Kenya. The study was carried out in 17 fragile commercial b...

Financial institutions hugely contribute to Rwandan economic development. However, different studies showed that they expose to risks that limit them from attaining their objectives. The banking sector's liquidity, efficiency, and profitability in Rwanda have weakened in the past four years-2015 to 2018 and its performance indicators collapsed. This study intended to examine the effect of the CAMEL rating model on the financial performance of commercial banks in Rwanda for the period ranging from 2014 to 2018. It was underpinned by four theories namely; cash management theory, agency theory, liability management theory, and market power theory. This paper covered11 commercial banks operating in Rwanda and adopted secondary data published by the Central Bank of Rwanda and the official websites of mentioned the 11 banks.Descriptive research design and panel regression were employed to evaluate the correlation between the predictor and outcome variables. The findings concluded that capital adequacy and asset quality are positively correlated to determine the value of financial performance. Liquidity management, management efficiency, and earnings management have a negative correlation. However, capital adequacy, asset quality, management efficiency are statistically significant to predict the ROA at a 5% level. This paper recommends that both the banks' management and financial regulatory body should work together to formulate policies that would help improving banking sector efficiency without violating the right of their clients. When it comes to the evaluation of financial institutions, all the CAMEL model factors should be considered.

Sound financial environment of the banking industry is the guarantee not only to her depositors but equally significant to the shareholders, employees and the whole economy as well. In line to this, efforts have been made from time to time to measure the performance of banks in the country. A number of factors are used in the measurement of banks performance in a typical developing economy and among these is profitability. This study was based on the determinants of banks profitability in Nigeria: using CAMEL model. The objective of the study was to determine the impact of CAMEL on the profitability of Nigerian banks. The data of the commercial banks in Nigeria were obtained for the period of 2001 to 2010. The model was estimated using ordinary least square method and the Statistical Package for Social Sciences (SPSS) 19. The findings based on the analysis elucidate that liquidity has a significant impact on banks profitability while capital adequacy, assets quality, management efficiency, earning did not. It was then recommended that banks should make sure that they maintain a reasonable liquidity position at all times to meet up regular financial obligations thereby maintaining depositors' confidence in the industry and increase profitability.

International journal of scientific and research publications, 2017

This study sought to analyze the overall performance of private commercial banks in Ethiopia using CAMEL rating approach. In this study, the financial performance of six sampled private banks was measured using the audited financial reports of 10 years period (2007-2016). Novel feature of this study was the inclusion of more explanatory variables, which were not used by the average researchers i.e. fixed asset to total assets, net profit per employee, total deposit per no. branches, total loan per no. of branches, measurements.

2015). Furthermore, according to Busch et al.,(2015), economic and social objectives are intricately interwoven, making financial performance inexorably related to social goals. Bank capital, asset quality, management potential, income assessment, and liquidity are all CAMEL criteria, according to Bhasin (2016), could be used to calculate a bank's financial performance. CAMEL parameter ratios are also significant to banks' financial performance decisions, according to the author, because greater ratios above the minimal standards indicate that banks' financial performance trends are robust. Banks' ultimate purpose, according to Ongore and Kusa (2013), is to make money, and ROA, ROE, and net interest margin are important performance metrics for assessing banks' financial success. The major financial measures for Kenyan commercial banks in this research will be ROE and ROA. These indicators (ROA and ROE) show financial power, weaknesses, opportunities, and hazards, and they include effectiveness, growth, and even consumer happiness (Fwamba, Nasimiyu and Toroitich, 2020).

of Science (Accounting and Finance) complies with the regulations of the University and meets the accepted standards with respect to originality and quality. Signed by the examining committee: Examiner Samuel Kifle (Phd) Signature _____________ Date ___________________ Examiner Habtamu Birhanu (Phd) Signature ____________ Date _________________ Advisor Asmare Emerie (Phd) Signature _____________ Date _________________ ___________________________________________________ Chair of Department of Graduate Program Coordinator.

International Journal of Financial Management, 2018

The study has investigated one of the key research questions: how bank-specific factors are related to bank performance? The model constructed is framed based on the commonly used supervisory tool to monitor bank performance: CAMEL. This consists of elements such as Capital Adequacy, Asset Quality, Management, Earning and Liquidity. It has used six variables representing each of the components and runs a regression model based on fixed and random models. The outcome shows that many of the bank-specific factors have a significant statistical relationship with performance measures. Despite the mixed result in the various models, the study explored that a bank's capital holding, asset quality and business diversification, cost control and liquidity positions are important parts of the management decisions that have a significant influence on its performance.

Archives of Business Research, 2017

The study evaluated the financial performance of three listed commercial banks in Botswana for the period 2011-2015 applying the CAMEL model. The study used the secondary data sourced from the annual reports of the listed banks. Results indicate that selected banks were highly leveraged and that their liquidity position was sound. The correlation analysis revealed that Earning per share had a significant positive correlation with liquidity ratio of total customer deposits to total assets and that leverage ratio was significantly negatively correlated to the ratio of equity capital to assets. Other CAMEL ratios were not significantly correlated to Earnings Per Share. The regression analysis showed that Capital adequacy, Asset quality, Earning ability and Managerial efficiency had no significant relationship with selected banks' performance measured in terms of Earnings per share. On the other hand, the Liquidity position of these banks was found to be significantly related to the performance of selected banks at 5% significance level. The findings also indicated that, overall, the selected banks performed well during the study period in terms of most of the parameters of CAMEL model with adequate capital and assets when compared to benchmarks. The earning capacity of the selected banks was also on the increase. The findings of this study will be helpful to the management of selected banks in making appropriate managerial decisions.

Journal of Applied Finance & Banking, 2023

This study aims to evaluate the performance of the Sierra Leone banking sector using Camel rating framework. The study adopts a descriptive research design in which the Least Square regression method is used. The study covers the period from 2012 to 2021 inclusive. The variables considered for this study include capital adequacy, asset quality, earnings ability of the banks and liquidity management within the banking sector. From the findings of the study; all the variables used have positive relationships or coefficients except Asset Quality and Liquidity Management, which has a negative coefficient of-0.007021 and-0.03513 but these relationships are insignificant to banks' performance in Sierra Leone. The findings from the study also indicate that Capital Adequacy and Earning Ability are having positive and significant effect on bank`s performance in Sierra Leone.