Abstract
AbstractRating the reliability of banks has always been an important practical problem for businesses and the economic policy makers. The best way to do this is the CAMEL analysis. The aim of this paper was to create a bank-rating indicator from the five fields of the CAMEL analysis using two-two indicators for each field for the Turkish Islamic banking system. According to the results of the analysis, we could rank the Turkish Islamic banks. Beside the widespread use of the CAMEL analysis, we applied the Similarity Analysis as a new method. We compared the results from the two methods and came to the conclusion that the CAMEL analysis does not adequately provide a fairly shaded picture about the banks. The Component-based Object Comparison for Objectivity (COCO) method gave us the yearly results in time series form. The comparison of the time series data leads to the problem of deciding about what is more important for us – average, standard deviation or the slope. For handling this problem, we used Analytic Hierarchy Process, which gave weights to these indicators.
Highlights
The Islamic finance models and practice of Islamic finance systems lived its renaissance in the post-2008 crisis years (Balazs 2011; Varga 2012)
We compare the CAMEL order with the order which can be read from the analysis of the Component-based Object Comparison for Objectivity (COCO) method (Tables 2–11)
Our aim was to implement the CAMEL analysis on the sample of four Islamic banks operating in Turkey, by creating a bank-rating indicator from the five fields of CAMEL analysis using twotwo indicators for each field
Summary
The Islamic finance models and practice of Islamic finance systems lived its renaissance in the post-2008 crisis years (Balazs 2011; Varga 2012). According to the data of the Islamic Financial Services Board (ISFB 2017), the Islamic finance activity reached 1.5 billion USD by 2016. The financial crisis of 2008 affected the Islamic banks as well. In the Islamic banking system (IBS), we can separate different groups of banks. In these groups, mild exposure characterised the banks that had low-level of cross-border activity. Mild exposure characterised the banks that had low-level of cross-border activity These banks, based on solid foundations, were not affected by high-risk investments as much as the conventional banks. Most of the Sariah-compatible financial institutes have significantly higher capital adequacy ratio than the conventional banks
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