CAMELS Approach Research Articles

The Contribution of Islamic Banking to Economic Growth the Organization of Islamic Cooperation (OIC) Countries with the CAMELS Approach

The purpose of this study is to examine the contribution of Islamic banking to economic growth by analyzing the influence of Islamic banking performance on economic growth using the CAMELS method. A quantitative approach is employed in this research with secondary data in the form of panel data. Data sources are obtained from the publications of the Islamic Financial Services Board (IFSB) and the World Bank, using a sample comprising 6 countries that are members of the Organization of Islamic Cooperation (OIC) with a time range from 2013 to 2022. The results of the testing demonstrate that the variables CAR, ROA, NPF, and MAN do not significantly affect economic growth, while LIQ and SEN have a positive effect. However, simultaneously, CAR, MAN, NPF, ROA, LIQ, and SEN collectively influence economic growth.

BANK NTB SYARIAH'S SOUNDNESS: A MULTI-METHOD ASSESSMENT USING CAMELS, RGEC, AND ALTMAN Z-SCORE

This paper endeavors to appraise the level of stability of Bank NTB Syariah during the time span of 2019 to 2021, by employing the CAMELS technique (which scrutinizes the bank's Capital, Assets, Management, Earnings, Liquidity, and Market Sensitivity), RGEC (which assesses the Risk Profile, Good Corporate Governance (GCG), Earnings, and Capital), as well as the Altman Z Score method (which analyzes the potential for bankruptcy). The data utilized for this research were procured through the application of documentation techniques and sourced from the financial statements and annual reports of Bank NTB Syariah, from 2019 to 2021. The data analysis technique utilized involved an evaluation of the bank's level of stability, utilizing a risk-based approach, encompassing the CAMELS, RGEC, and Altman Z Score factors. Based on the appraisal of the level of stability of PT. Bank NTB Syariah from 2019 to 2021, as evaluated by the comprehensive RGEC and CAMELS approach, the bank is deemed to be in a sound financial condition. However, the results of the bankruptcy prediction analysis, utilizing the Altman Z Score model, indicate that the financial state of Bank NTB Syariah in 2021 is situated in a nebulous area, albeit superior to its condition in 2020 and 2019, which indicated an indication of financial distress and potential bankruptcy.

A Study of the State Bank of India's Performance Using the CAMELS Method of Analysis

When judging the current state of the economy, it is essential to consider how vital the financial sector is to boost economic activity. It is crucial to the operation of an economy's banking system, which includes monetary and fiscal systems, all of which rely on how well that economy's banking system performs. We will use the CAMELS approach of analysis to the gathered data to evaluate the performance of the State Bank of India. The Reserve Bank of India was the first institution to suggest the CAMELS Rating System. The authors used data from reliable secondary sources for the SBI from 2012 to 2022 to conduct their study. The years 2012 through 2022 saw the utilization of this data. This research employed an OLS regression model to examine the variables' unit roots and the data's normality. This was done to find out what kind of relationship there is between the dependent variable and the other variables. The financial standing of models representing the performance of the banking sector is examined using the CAMELS analysis technique. These prototypes are used to explore the financial performance of the archetypes of Indian financial institutions that make up the banking industry. This investigation's primary target, the State Bank of India, can render a decision. The data provided in this study also helps future researchers comprehend how the CAMELS Approach impacted the effectiveness and profitability of financial organizations. Future researchers will have access to this study's financial measurements and the CAMELS Method, which may be used to assess the overall financial health of institutions. The links to these two contributions are provided below.

Bank-Specific Determinants of Loan Growth in Vietnam: Evidence from the CAMELS Approach

Bank-Specific Determinants of Loan Growth in Vietnam: Evidence from the CAMELS Approach

Economic growth and financial performance of Islamic banks: a CAMELS approach

PurposeThe purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and Saudi Arabia within the endogenous growth model framework.Design/methodology/approachThis study applied dynamic panel system GMM to estimate the impact of the financial performance of Islamic finance on economic growth using quarterly data (2014:1-2018:4). CAMELS system parameters were employed as variables of the financial performance of Islamic finance and gross domestic product (GDP) as a proxy of economic growth. The sample contained all Islamic banks working in the five countries.FindingsThe findings demonstrated that the only significant factor of the financial performance of Islamic finance, which affects the endogenous economic growth, is profitability through return on equity (ROE). The experimental findings also indicated the necessity of stimulating other financial performance factors of Islamic finance to achieve a significant contribution to economic growth.Practical implicationsThe analysis in this paper would fill the literature gap by investigating the link between financial performance of Islamic finance and economic growth, as this study serves as a guide for the academians, researchers and decision-makers who want to achieve economic growth through stimulating Islamic finance in the banking sector. However, this study may well be extended to investigate the link between the financial performance of Islamic finance and economic growth over the Z-score model as another measure for the financial performance of Islamic finance.Originality/valueThis paper is the first that investigates the link between financial performance of Islamic finance and economic growth empirically using CAMELS parameters within the endogenous growth model to provide robust information about this link based on a sample of the top pioneer Islamic finance countries.

“How using derivative instruments and purposes affects performance of Islamic banks? Evidence from CAMELS approach”

The increase of the use of derivative instruments by Islamic banks for different purposes motivate us to conduct this study. This work has twice objective: firstly, to investigate the effect of each derivative instrument (forwards, futures, swaps or options) on the performance of Islamic banks, and secondly to examine the effect of each derivative purpose (hedging or trading) on the performance of Islamic banks.To reach this end, dynamic panel data econometrics with GMM system are conducted on 32 Islamic banks during the period from 2007 to 2017. The CAMELS approach is used to measure the performance of sample banks.Statistics on sample banks reveal that Islamic banks are substantial users of derivatives, prefer using derivatives for trading purpose than for hedging purpose, and have acceptable level of performance.The main results confirm that using options affects positively and moderately the performance of sample banks. In the same way, we find that swaps have positive and weak impact on the performance of sample banks. However, the results reveal that using forwards decrease the performance of sample banks. Finally, we find that futures have ambiguous and marginal effect on the performance of sample banks.As regards derivative purposes, results do not see which purpose mainly motivate the Islamic banks to invest in the derivatives market.As theoretical implication, we suggest for further studies to explore more the differences between using derivatives by Islamic banks for trading and hedging purpose.Finally, as practical implications, we recommend for managers of Islamic banks to enlarge their use of options and swaps, to supervise their use of forwards and to stop their use of futures.

Sustainability in the Banking Sector: A Predictive Model for the European Banking Union in the Aftermath of the Financial Crisis

Given the central role of banks in financial stability and the recent impact of their insufficient capitalization, this article focuses on finding determinants of their solvency through financial variables. The study considers the European Banking Union framework and the results of the latter stress test exercises, using a panel of the 45 banks based in 15 European countries that were stress tested in 2014, 2016 and 2018. This paper models bank soundness proxied by the stressed tier capital 1 ratio by means of financial indicators representing a CAMELS (Capital, Assets quality, Management, Earnings, Liquidity and Sensitivity to market risk) approach as well as global systemically important financial institutions (G-SIFIs) additional requirements. The model also specifies a dummy covariate referred to the disclosure of corporate social responsibility (CSR) reports, adopting a comprehensive sustainability scheme. The research period starts with the European Banking Union and includes the three exercises conducted since then. We find that financial sustainability is positively correlated with higher capitalization, earnings and liquid assets, while poor quality assets (high non-performing loans) and inefficiency impact negatively on bank soundness. Moreover, it considers the year-scenario interaction either as a fixed or a random effect. The results support capital and liquidity regulation and highlight factors that reinforce banking soundness. They also reveal a positive connection between CSR and banking solvency.

An Analysis of Islamic Banks Performance using Sharia Maqashid Index, Sharia Conformity and Profitability (SCnP) and CAMELS

Indonesian Islamic banking system has existed for more than 25 years old. However, at this age, it still has not had its own instrument for measuring performance and still adopts the orthodox measuring instrument which is restricted to financial ratio measurement only. The use of this orthodox measuring instrument as the only tool to evaluate the Islamic banks performance is considered less suitable, both in terms of the features and the purposes of Islamic banking in general. Therefore, this study aims to evaluate the performance of Islamic banks using the Sharia Maqashid Index, Sharia Conformity and Profitability (SCnP) and CAMELS approaches. The population of this study was all Islamic Commercial Banks listed in Bank Indonesia from 2012-2016, while the data analysis technique used the quantitative research with descriptive approach. The Sharia Maqashid Index approach has three variables; educating people, establishing justice, and achieving public interest. The Sharia Conformity and Profitability (SCnP) approach has two variables; Sharia Conformity and Profitability. Meanwhile, the CAMELS approach has five variables; Capital, Asset Quality, Management, Earning, and Liquidity. The results of the research using the Sharia Maqashid Index approach shows that Bank Muamalat is in the first rank, followed by Bank Syariah Mandiri, BNI Syariah, and Bank Mega Syariah. By using the SCnP approach, the research shows that there are no Islamic banks in the upper right quadrant that has high sharia suitability and high profitability. Moreover, the CAMELS approach shows that all Islamic banks are quite healthy. The application of these performance measurement approaches become a factor that plays a dual role for the achievement of financial performance and sharia conformity.

Performance Analysis Of Banks In Turkey Using Camels Approach Case Study: Six Turkish Banks During 2005 To 2016

This study analyzes the performance and financial credibility of six Turkish banks for the period of 2005-2016. The sample comprises two state-owned deposit banks, three private-owned deposit banks, and one foreign bank. As one of the most popular methods for measuring banking performance, CAMELS method is used to analyze the performance of the banks. CAMELS stands for Capital Adequacy, Asset Quality, Management Efficiency, Earning Quality, Liquidity, Sensitivity respectively. When the average rates of 2014, 2015 and 2016 ratios –for each one of these mentioned categories- separately examined, none of the banks is found to be superior to the others. As for the composite rate for CAMELS though, Ziraat Bank has the highest rate (29.32%) and Halkbank stands at the last row (21.94%). Overall, the values of the CAMELS ratios for 2016 seem to be quite close to each other. However, when the yearly analysis is conducted, some significant differences in the categories of CAMELS ratio are observed. In addition, ANOVA test results state that the means of CAMELS ratios are significantly different over the years. Finally, comparison of CAMELS ratings with institutional ratings shows that the latter does lag the financial indicators of the companies and even can be not reflective of the current financial condition of the company. On the other hand, the trends of the institutional ratings and of financial indicators are consistent over a long period of time.

Assessing bank performance measurement in islamic banking industry

The Indonesian Islamic banking industry, attaining the age of more than 25 years tend to adopt conventional approach to measure its bank performance. Although this method could well inform the performance of the bank financial, this measurement fails to inform both the characteristics of Islamic banking. This study is designed to evaluate three Islamic bank performance measurements: Sharia Maqashid Index, Sharia Conformity and Profitability (SCnP), and CAMELS. Sharia Maqashid Index approach has three variables: educating individual, establishing justice, and public interest. SCnP approach has two variables: Sharia conformity and profitability. While CAMELS approach has five variables: Capital, Asset Quality, Management, Earning, and Liquidity. This study uses data from Islamic Commercial Banks registered on Bank Indonesia from 2012-2016. The data analytical technique is quantitative method using descriptive approach. The results of the study using Sharia Maqashid Index reveal that there is a difference in Islamic Commercial Banks performance. The used of SCnP reveals that none of Islamic Commercial Banks on upper right quadrant. The used of CAMELS reveals that all of Islamic Commercial Banks in Indonesia have Fairly Healthy predicate. These findings suggest that, to provide a comprehensive picture of its performance, the Islamic banks need to adopt both Sharia-based as well as financial based measurement.

Financial Soundness of Vietnamese Commercial Banks: An CAMELS Approach

This study investigates the financial soundness of Vietnamese commercial banks between 2008 and 2013 using the combination of data envelopment analysis and CAMELS approach. These findings indicate that only one state-owned commercial bank is listed of the ten best-performing banks, suggesting that the implicit support from the government provides less incentive for these banks to improve their performance. In addition, the ten worst-performing banks are also indicated so that the State Bank of Vietnam should put more attention on supervising and monitoring them in order to strengthen the Vietnamese banking system.

An Assessment of Islamic Banking in Bosnia and Herzegovina – a comparative analysis using the CAMELS approach

This paper examines the phenomenon of Islamic banking in Bosnia and Herzegovina. Although almost half of the Bosnian population is recognized as Islamic, there is only one bank purely based on Sharia operating in this country. The aim of the article is to conduct a comparative analysis of the financial standing of this bank and the banking sector in this country and region. The chosen method of analysis is CAMELS, which examines an institution by taking into consideration its most crucial elements: capital, assets, management, earnings, liquidity and sensitivity to risk.

The Impact of Intellectual Capital on the Performance of the Egyptian Banks

The research aims at identifying the impact of intellectual capital on the performance of Egyptian banks. Intellectual capital is measured by value added intellectual capital VAIC, value-added intellectual capital coefficient components, market to book value and Tobin’s Q, while banking performance is measured according to CAMELS approach. Results indicate that there is a significant impact of intellectual capital on capital adequacy, asset quality, earnings and liquidity in Egyptian banks. This has been conducted using panel data analysis according to fixed effect technique as applied on a sample of 13 banks listed in the Egyptian exchange during the period from 2010 to 2014.

مدخل لمراجعة الاستدامة المحاسبية باستخدام الإجراءات التحليلية : دراسة تطبيقية على الشركات الصناعية في دول الخليج العربي = Review of Accounting Sustainability Using Analytical Procedure : Applied Study on GCC Industrial Companies

المراجعة | الاستدامة المحاسبية | مؤشرات الاستدامة | الإجراءات التحليلية | منهج CAMELS | منهج CAPPELO | الحاكمية | الشركات الصناعية في دول الخليج العربي | Review | Accounting Sustainability | Sustainability Indicators | Analytical Procedures | CAMELs Approach | CAPPELO Approach | Governance | GCC Industrial Companies

Performance Assessment of Deposit Banks with CAMELS Analysis using Fuzzy ANP-MOORA Approaches and an Application on Turkish Banking Sector

Performance assessment in banking sector has been attached to investment decisions and efficiency analysis in the last decade. This study compares banking performance with using novel techniques in Turkey. The aim of this study is to assess the performance of Turkish deposit banks with the application of CAMELS analysis using Fuzzy ANP and MOORA approaches within the fuzzy environment. In this study, the novel hybrid model has been adopted to CAMELS analysis with related 17 different ratios for 23 deposits banks in Turkey. The major findings of this study are (i)“capital adequacy” is the most significant component of CAMELS approach, which contributes to banking stability and performance whereas “sensitivity to market risk” is the least important one among the other 4 major components, and (ii) when viewing the overall ranking, Bank 13 with the 13.1 percent of asset size in the sector is at the first rank for the CAMELS-based performance comparison, (iii) Bank 18with the 1.8 percent of asset size in the sector, has the lowest performance score, (iv) there is a positive relationship between asset size and banking performance in Turkey.

An Analysis on the Performance of the Participation Banks in Turkey

Interest-free banking practice in Turkey commenced in 1983 and was integrated within the framework Banking Regulation and Supervision Agency (BRSA-BDDK) in 2005. These banks name’s had been changed as participation banks. With these changes, participation banks were treated with the same legal regulations as commercial banks; therefore, it is worth investigating their comparative performance under the new conditions. To do this, the CAMELS approach was employed for the comparison of the performances and determination of the differences between the two types of banking practices. Our analysis shows that, compared to the regular banks, the participation banks performed well with respect to their sensitivity to the market risks. On the other hand, they appear to have done poorer in terms of liquidity and management within the period of 2006-2011. Taking into consideration the pros and cons, the participation banks in Turkey may be suggested as effective as the commercial banks.

Performance comparison of Islamic (participation) banks and commercial banks in Turkish banking sector

Purpose– The purpose of this paper is to attempt to compare the performance of Islamic banks against conventional banks in Turkey. This comparison is much more distinctive and significant in Turkey when compared to other countries, as Turkey stands as a model for the world in interest-free banking system.Design/methodology/approach– The comparative performance analysis was conducted by means of logistic regression method during the period of 2001-2009. The CAMELS approach is utilized to assess the managerial and financial performance of banks.Findings– The results signify that Islamic banks operating in Turkey perform better in profitability and asset management ratios compared to conventional banks but lag in sensitivity to market risk criterion. These findings might mainly be ascribed to the fact that these banks allow lower provisional losses compared to conventional banks and have some tax advantages.Research limitations/implications– Utilizing a more recent and consistent data set, the analyses could be replicated to determine if the results are subject to any sample bias.Practical implications– These finding reveal significant implications for potential entrants into Turkish banking sector particularly for foreign investors.Social implications– The findings from this study may reinforce the awareness and confidence in participating banks in Turkey.Originality/value– Turkey is particularly interesting to conduct this analysis because Turkey is a Muslim but secular country and both Islamic and conventional banks are subject to same set of banking regulations which are based on Western traditional banking system. Furthermore, to the knowledge, there is not a comprehensive study that compares the performance of conventional and Islamic banks in a Western banking system.

The Evolution of Romania's Financial and Banking System

In this paper I analyzed Romania's banking system evolution in the period 2000 – 2012, through a research both theoretical and empirical. The database is collected from monthly Reports of National Bank of Romania and is classified into categories as follows: key prudential indicators, banking risk information, loans and commitments granted by banks, loan portfolio classification and key ratio for minimum reserves. Afterwards, those indicators are framed through CAMELS approach. The research period was divided into pre-crisis period - before 2007 and post-crisis period - after 2007 and up to the present. The 2007 year was used as a crossroad point because starting with this year it was visible the downturn of the economic and financial evolution in Romania's system and also at global level. The research objectives are to observe the evolution of the banking system in Romania in the prior crisis period as well as after the crisis set in and to identify possible correlations and contagion effects of the selected indicators. Concluding, there are cross sectional influences between selected banking indicators which might gave us a warning signal regarding the evolution of the banking system.