The document introduces the CAMELS rating system used by bank supervisory authorities to evaluate domestic and foreign banks. CAMELS ratings assess banks on capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Banks are given scores from 1 to 5 on each factor, with lower scores indicating stronger performance. An average score less than 2 signifies a high-quality institution, while scores above 3 require supervisory attention.
In this article how risk management in banks is an important concept, what type of risks banks faces and how they curb it through risk management model is described
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
This material takes a pragmatic look at how the risks in the Treasury operations of a Bank can best be managed. It identifies the risks in the treasury function of a bank and highlights the need for an ERM approach for optimality.
This presentation provides complete study ofcredit risk management,how it was performed in yester years ,how it is taken care nowadays and what is the road ahead in future
An Evaluation of Camels Rating System as a Measure of Bank PerformanceAbu Hasan Al-Nahiyan
The principle objective of the study is to evaluate the performance of First Security Islami Bank (FSIBL) on the bases of CAMELS rating system. Specifically this study will look into:
a) To understand the literature of CAMELS rating system.
b) To know about First Security Islami Bank Ltd.
c) To evaluate CAMELS components on FSIBL.
d) To evaluate composite rating on FSIBL.
To suggest some policy measures for financial improvement of FSIBL.
In this article how risk management in banks is an important concept, what type of risks banks faces and how they curb it through risk management model is described
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
This material takes a pragmatic look at how the risks in the Treasury operations of a Bank can best be managed. It identifies the risks in the treasury function of a bank and highlights the need for an ERM approach for optimality.
This presentation provides complete study ofcredit risk management,how it was performed in yester years ,how it is taken care nowadays and what is the road ahead in future
An Evaluation of Camels Rating System as a Measure of Bank PerformanceAbu Hasan Al-Nahiyan
The principle objective of the study is to evaluate the performance of First Security Islami Bank (FSIBL) on the bases of CAMELS rating system. Specifically this study will look into:
a) To understand the literature of CAMELS rating system.
b) To know about First Security Islami Bank Ltd.
c) To evaluate CAMELS components on FSIBL.
d) To evaluate composite rating on FSIBL.
To suggest some policy measures for financial improvement of FSIBL.
Real world #microservices with Apache Camel, Fabric8, and OpenShiftChristian Posta
What are, or aren't, microservices?
There's a lot of hype and buzz, but microservices emerged organically vs how some of the other distributed architectural styles were "handed down to us", so I believe there's some good things once you cut through the hype. In this talk I discussed what are and are NOT microservices, introduced some concepts, and discussed some concrete open-source libraries and frameworks that can help you develop and manage microservice style deployments.
This presentations chalks out in detail information about ALM in Indian Bank. It starts with the basics of Balance sheet; applicability of ALM in real life; Evolution and then starts with main topics of ALM like structured statement; Liquidity risk, its management; currency risk and finally ends with Interest Risk management.
Links to Video’s in the ppt
Balance Sheet
http://www.investopedia.com/terms/b/balancesheet.asp
NII/NIM
http://www.investopedia.com/terms/n/netinterestmargin.asp
www.abhijeetdeshmukh.com
What is this Project’s Objective This project is designe.docxalanfhall8953
What is this Project’s Objective?
This project is designed to improve your ability to analyze a particular bank's performance. The
emphasis should be to explore your bank from a regulator’s point of view. In that respect you
should address the six CAMELS components and try to identify any "red flags" that could indicate
potential problems in your bank. The Excel file under the name of “Bank Financial Analysis”
should be used to capture the financial data for your bank and to show the associated financial
ratios. You should be able to find all your data in your bank’s Uniform Bank Performance Report
(UBPR) which is available at www.ffiec.gov. Your written report should be no less than 5 pages
long (typed, double-spaced) not including the Excel worksheet. The six CAMELS components
are: Capital adequacy; Asset quality; Management quality; Earnings record; Liquidity position;
and Sensitivity to market risk. Following is a more detailed listing of the items that you need to
address:
A. Liquidity
Consider your bank’s Uniform Bank Performance Report (UBPR) and provide an overview of your
bank’s liquidity by reviewing the following areas:
1. Liquidity and Funding Ratios especially the Net Non-Core Funding Dependence
and Loan to Assets Ratios – The first ratio measures the degree to which the bank is
funding longer-term assets (loans, securities that mature in more than one year, etc.) with
non-core funding. Non-core funding includes funding that can be very sensitive to
changes in interest rates such as brokered deposits, CDs greater than $100,000, and
borrowed money. Higher ratios reflect a reliance on funding sources that may not be
available in times of financial stress or adverse changes in market conditions. What are
the trends in these ratios? How do they compare to the peer?
2. The availability of liquid assets readily convertible to cash without undue loss-
Consider Federal funds sold, available for sale securities, loans for sale, etc.
3. Core deposit/asset growth - Are core deposits capable of funding anticipated asset
growth?
4. Diversification of funding sources - A bank with strong liquidity has a strong core
deposit base, established borrowings lines, and procedures in place for acquiring
internet-based or other forms of emergency borrowing.
5. External Forces - Economic conditions, competition, marketing efforts, etc. have a
material impact on the need for liquidity going forward.
You should also take a look at your textbook’s continuing case assignment for chapter 11 which
discusses various bank liquidity indicators.
B. Sensitivity to Market Risk
Sensitivity to Market Risk - refers to the risk that changes in market conditions could adversely
impact earnings and/or capital. Market Risk encompasses exposures associated with changes in
interest rates, foreign exchange rates, commodity prices, equity prices, etc. While all of these
items are important, the primary risk in most b.
Managing Credit Risk
• A major part of the business of financial institutions is making loans,
and the major risk with loans is that the borrow will not repay.
• Credit risk is the risk that a borrower will not repay a loan according
to the terms of the loan, either defaulting entirely or making late
payments of interest or principal.
• Concepts of adverse selection and moral hazard provides framework
to understand the principles that is used to minimize credit risk, yet
make successful loans.
MODULE 3:
Credit Risks Credit Risk Management models - Introduction, Motivation, Funtionality of good credit. Risk Management models- Review of Markowitz’s Portfolio selection theory –Credit Risk Pricing Model – Capital and Rgulation. Risk management of Credit Derivatives.
2. A rating system for domestic and foreign banks
based on the international CAMELS model combining
financial management and systems and control
elements was introduced for the inspection cycle
commencing from July 1998. CAMELS evaluates
banks on the following six parameters
3. Capital adequacy
Asset quality
Management
Earnings
Liquidity
Sensitivity to market
4. The purpose of CAMELS ratings is to
determine a bank’s overall condition and to
identify its strengths and weaknesses:
Financial
Operational
Managerial
5. Each element is assigned a numerical rating based on five key
components:
1 Strong performance, sound management, no cause for supervisory
concern
2 Fundamentally sound, compliance with regulations, stable, limited
supervisory needs
3 Weaknesses in one or more components, unsatisfactory practices,
weak performance but limited concern for failure
4 Serious financial and managerial deficiencies and unsound practices.
Need close supervision and remedial action
5 Extremely unsafe practices and conditions, deficiencies beyond
management control. Failure is highly probable and outside financial
assistance needed
6. Bank supervisory authorities assign each
bank a score on a scale of 1 (best) to 5
(worst) for each factor.
If a bank has an average score less than 2 it is
considered to be a high-quality institution
while banks with scores greater than 3 are
considered to be less-than-satisfactory
establishments.
The system helps the supervisory authority
identify banks that are in need of attention.
7. Capital adequacy is measured by the
ratio of capital to risk-weighted assets
. A sound capital base strengthens
confidence of depositors.
8. Nature and volume of assets in relation to total
capital and adequacy other reserves
Balance sheet structure including off balance
sheet items, market and concentration risk
Nature of business activities and risks to the
bank
Asset and capital growth experience and
prospects
Earnings performance and distribution of
dividends
Capital requirements and compliance with
regulatory requirements
Access to capital markets and sources of capital
9. One of the indicators for asset quality is the ratio
of non-performing loans to total loans (GNPA).
The gross non-performing loans to gross
advances ratio is more indicative of the quality of
credit decisions made by bankers. Higher GNPA
is indicative of poor credit decision-making.
Asset represents all the assets of the bank,
current and fixed, loan portfolio, investments
and real estate owned as well as off balance
sheet transactions
10. Asset quality is based on the following considerations:
Volume of problem of all assets
Volume of overdue or rescheduled loans
Ability of management to administer all the assets of the
bank and to collect problem loans
Large concentrations of loans and insiders loans,
diversification of investments
Loan portfolio management, written policies, procedures
internal control, Management Information System
Loan Loss Reserves in relation to problem credits and
other assets
Growth of loans volume in relation to the bank’s capacity
12. Management is the most important element for a successful
operation of a bank. Rating is based on the following factors:
Quality of the monitoring and support of the activities by the
board and management and their ability to understand and
respond to the risks associated with these activities in the
present environment and to plan for the future
Development and implementation of written policies,
procedures, MIS, risk monitoring system, reporting, safeguarding
of documents, contingency plan and compliance with laws and
regulations controlled by a compliance officer
Availability of internal and external audit function
Concentration or delegation of authority
Compensations policies, job descriptions
Overall performance of the bank and its risk profile
13. All income from operations, non-traditional sources, extraordinary items
It can be measured as the the return on asset ratio
14. Earnings are rated according to the following factors:
Sufficient earnings to cover potential losses, provide
adequate capital and pay reasonable dividends
Composition of net income.
Level of expenses in relation to operations
Reliance on extraordinary items, securities transactions,
high risk activities
Non traditional or operational sources
Adequacy of budgeting, forecasting, control MIS of income
and expenses
Adequacy of provisions
Earnings exposure to market risks, such as interest rate
variations, foreign exchange fluctuations and price risk
15. Cash maintained by the banks and balances
with central bank, to total asset ratio is an
indicator of bank's liquidity.
In general, banks with a larger volume of
liquid assets are perceived safe, since these
assets would allow banks to meet
unexpected withdrawals.
16. Liquidity is rated based on the following factors:
Sources and volume of liquid funds available to meet
short term obligations
Volatility of deposits and loan demand
Interest rates and maturities of assets and liabilities
Access to money market and other sources of funds
Diversification of funding sources
Reliance on inter-bank market for short term funding
Management ability to plan, control and measure
liquidity process.
Contingency plan
17. Sensitivity to market risks is not taken into
consideration by CBI.
18. Market risk is based primarily on the
following evaluation factors:
Sensitivity to adverse changes in interest
rates, foreign exchange rates, commodity
prices, fixed assets
◦ Nature of the operations of the bank
◦ Trends in the foreign currencies exposure
◦ Changes in the value of the fixed assets of the bank
◦ Importance of real estate assets resulting from
loans write off