Key Ratios for CAMEL Rtings

The key ratios used by the examiners to determine the CAMEL rating of any
institution are given below.
Capital
------------Total Assets
This is a capital adequacy ratio that measures captal in relation to total assets.
Capital provides a cushion to absorb losses, its rate of growth should equal or exceed the
rate of growth in total assets.
Capital Estimates losses
---------------------------------Total Assets
This ratio measures the capital adequacy [capital less estimated losses] in relation
to total assets. A low ratio value in relation to the peer group average indicates limited
ability to withstand losses and / or future economic downturns.
Delinquent loans
----------------------Total Assets
This is an asset quality ratio that measures delinquent loans in relation to the total
loans. It indicates not only control but also potential losses.
Net charge offs
----------------------Average loans
This is an asset quality ratio that measures net charge-off in relation to average
loans. Charge-off is an important indicator of the effectiveness of lending and collection
practices.
Non earning assets
------------------------------Total Assets
Basically this is an asset quality ratio. A high value ratio in relation to the peer
group average may indicate that the bank is not maximizing its asset / earning potential.
Operating expenses Provision for loan losses Interest expenses
-------------------------------------------------------------------------------------Average Assets

A high ratio value in relation to the peer group average may indicate that
operating expenses are not being adequately controlled.
Net income before statutory reserve transfers
-----------------------------------------------------------Average Assets
This ratio is an initial indicator of profitability. A positive ratio value shows that
earnings were sufficient to cover operating expenses and cost of funds.
Net income after transfers
------------------------------------Average Assets
This ratio is the proper indicator of profitability as the operating expenses and statutory
transfers have been met.