Evaluating the Performance of Commercial Banks Using the CAMELS Model – An Applied Study on Bahraini Banks

Abstract

This study aims to identify the "CAMELS" model as an effective and accurate tool to be used as a performance evaluator in banking industries and to anticipate future and relative risks. Banks being exposed to financial faltering is considered one of the important events that draws attention and calls for study, due to its extremely dangerous effects. CAMELS ratios are calculated in order to focus on financial performance, which stands for Capital adequacy, Asset quality, Management, Earning, Liquidity, and Sensitivity. In this study, some important ratios were selected and calculated to assess the performance of banks, and the data used were obtained from the annual financial reports of Bahraini banks. The obtained data are then compared with standard or model bank ratios. Certainly, the trends in accounts and related figures show important points for managers, as well as the CAMELS model rating can be an efficient tool to manage, control, and make sound decisions.