Capital Adequacy is assessed through the capital trend analysis. It measures how well the bank is able to handle losses and how they comply with interest and dividend rules.
Asset Quality covers its loan quality that impacts the earnings of the bank. This also compares possible investment risk factors and capital earnings. This establishes how stable the bank can be whilst facing risks (Stella, 2010).
Management assessment determines how the bank deals with financial stress, changing market conditions. This also evaluates the board of directors and top level managers of the bank. This parameter checks the effectiveness of the management.
Earnings include income from all operations (traditional and nontraditional) that provides financial gains to the bank. Examiners assess the company’s stability, growth, net interest margin, net worth level etc. to establish its earnings.
Liquidity is the company’s ability to convert assets into cash. Liquidity of financial institutions can be measured on different basis. Basis can be risk sensitivity of interest rate, dependence of financial institutions on short term financial respires available with institutions, at competence level, etc.
Sensitivity- CAMELS also under takes analysis of sensitivity of changes that undertakes in the financial market. This evaluates how lending to specific industries like agriculture, medical, credit card etc. affects the bank.