Abstract
On the basis of the original camel rating system, this study added the green indicator and formed the G-CAMELS evaluation system (An improved rating system based on the CAMELS rating system to evaluate the business operation of financial institutions more comprehensively.) to comprehensively evaluate the competitiveness of commercial banks. It followed China’s current requirements for the sustainable development of commercial banks. In this paper, factor analysis, entropy methods, and dynamic evaluation models are used to obtain the ranking of competitiveness. In addition, according to the same steps as above, the comprehensive ranking based on the CAMELS evaluation system (A comprehensive rating system which is standardized, institutionalized and indexed for business operations of commercial banks and other financial institutions.) was obtained. The two ranking systems were compared. It is found that with the entropy weight method, in the G-CAMELS system, the weight of the green index is quite large, so it magnifies the impact of the financial industry on the environment. Compared with the original CAMELS system, the newly formed system will increase the ranking of state-owned banks and there is no significant change in the ranking of joint-stock banks. In order to improve the competitiveness of banks, state-owned banks should innovate their banking business and continue to implement the green credit policy; joint-stock banks should continue to seize the opportunity of green credit and expand profitability while paying attention to safety. In addition, the government could consider relaxing green credit standards for city commercial banks to ease pressure on banks.
Highlights
Sustainable finance, as a term, first appeared in a UNEP (The United Nations Environment Program) report to finance ministers
To overcome limitations and meet the requirements of China’s economic development, this study has added the green indicator based on the original CAMELS to form the G-CAMELS system
After considering the possible influence of banks on the environment, the G-CAMELS evaluation system can comprehensively measure the situation of financial institutions
Summary
Sustainable finance, as a term, first appeared in a UNEP (The United Nations Environment Program) report to finance ministers. Taking environmental factors as a separate part of the system magnifies the impact of the financial industry on the environment, thereby stimulating banks to assume social responsibility and achieve sustainable development. It enriches the relevant research of CAMELS. From the perspective of the bank’s point of view, sustainable development can bring environmental benefits, and enables banks to increase their profit through the bank’s business operations or financial innovation. The first part of the paper is the introduction, the second part is the literature review, the third part is the research method, the fourth part is the index system construction and data preprocessing, the fifth part is the empirical analysis, the sixth part is the result, and the seventh part is conclusion and outlook
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