An Appraisal for Performance of Selected Banks with Camel Framework

Abstract

The project titled "An Appraisal of selected banks with CAMEL framework" studies in detail performance of Banks. The banking sector has been undergoing a complex, painful but comprehensive phase of restructuring since 1997, with a view to make it sound, efficient, and at the same time forging its links firmly with the real sector for promotion of savings, investment and growth. Although a complete turnaround in banking sector performance is not expected till the completion of reforms, signs of improvement are visible in some indicators under the CAMEL framework. Banks in Pakistan had to withstand several distinct types of pressures since 1997. First, the wave of multi pronged reforms, introduced by SBP, required banks to enhance capital adequacy, strengthen asset quality, improve management, increase earnings and reduce sensitivity to various financial risks. At the same time, on-site as well as off-site surveillance by SBP has assumed greater importance . The almost simultaneous nature of these developments makes it difficult to disentangle the positive impact of reform measures. Keeping this in mind, signs of i mpr ovements and deteriorations are discussed for the three banks in the five components of the CAMEL framework. The project also brings into the new Basel Accord is widely recognized, as a much needed effort to deal with the shortcomings of the current system. By realigning capital adequacy rules with banks' incentives it aims at restoring the link between risk and capital holding.