Introduction

CAMELS rating system has a score scale of 1-5. One is the highest possible score, while five is
the lowest possible score. So, through this rating system Bangladesh bank can determine the
strength or weaknesses and overall performance of the banks in the country. This rating is done
based on the financial statements of the banks, for example: profit or loss account and balance
sheet. Furthermore, central bank may also send officers to conduct on site examination. So, if the
performance of a bank is weak, corrective measures can be taken based on the evaluation.

Mechanism of the CAMELS Rating system:

For CAMELS rating system to work, a score is given to each category from 1-5.

The table is created to evaluate bank ‘X’ based on CAMELS Rating

Category Description Rating

Capital adequacy Does the bank have enough capital bare losses 1
Based on the credit quality what is the quality of the bank's
Asset quality assets 2.5
Management
capabilities ability to exploit profitable opportunities while managing risks 2
Earning Quality of earnings 3
Liquidity Ability to honor current liabilities 1
Sensitivity to market
risk exposer to change in interest rates 1
Total score   1.75