Camels
A framework rating banks on six areas: capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. Each is scored separately and then combined.
Where you will meet it
Camels appears in 3 learning outcomes on the CFA syllabus. A few of them:
- Explain the CAMELS approach to bank analysis, which covers capital adequacy, quality of assets, management, earnings, liquidity and sensitivity, with its main ratios and its limitations
“CAMELS rates six areas.”
- Analyse a bank using its financial statements and other considerations
“Analysing a bank means working through its statements with the CAMELS lens and then asking what the numbers imply together.”
- Explain further considerations that matter when analysing a bank
“Some factors sit outside the CAMELS scores but matter to a bank's risk.”
See also
Practise it
Practise camels until it is automatic: questions that explain every wrong option.
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