camels and pearls application to financial management of commercial banks

Group 10 PRESENTATION







 !
"##!$# 
%&'
()%'
()%'#( $( 
()
 !
 
 
 ! "#$$%& '(
 )'' *'*+'%,$* '
$%%% '%-% (.
Sources: vnexpress and taichinhdientu.vn
* !
 /%)&,$/),&-0'$
  % %''&
 )1"2,/3% &%4'' 
&' 566774585597 88':

 5&;2'-%%' '3%$
 "<,  &''=%>?$ 
0?
Sources: vnexpress and taichinhdientu.vn

II. Measuring and evaluating
performance of banks

Collect nancial informaon, then analyze and evaluate banks’ performance
based on some chosen criteria.
)!+,!

)!+,!

$,-$$#
.
$,-$$#
.
III. PEARLS
•
Is a nancial performance monitoring system that consists of a set of a nancial
ratios of indicators that help standardize terminology between institutions.
•
Oer management guidance for credit unions and other savings institutions
Protecon
Protecon
Eecve Financial Structure
Eecve Financial Structure
Liquidity
Liquidity
Asset Quality
Asset Quality
Rates of Return & Cost
Rates of Return & Cost
Sign of Growth

Sign of Growth
Protecon
Ensure that the credit union provides depositors a safe place to save their money
Asset Quality
Measure assets, liabilies and capital, and recommends an “ideal” structure for credit
unions.
Eecve Financial Structure
Help instuons control delinquencies and monitor the rao of non-earning assets to total
assets
Rate of Return and Costs
Segregates all essenal components of net earnings to help calculate investment yields and
evaluate operang expenses.
Signs of Growth
The maintenance of adequate liquidity reserves is essenal to sound, nancial management
Liquidity
Links growth of assets to protability and other key areas by evaluang the strength of the
system as a whole
PEARLS Objective

Execuve management tools: monitoring the performance of credit unions

Standardized Evaluaon Raos and Formulas: eliminang the diverse criteria to
evaluate operaon and creates a universal nancial language.

Objecve, Comparave Rankings: comparing credit union performance on a naonal
basis.

Facilitate Supervisory Control: providing the framework for a supervisory unit at the
Naonal Federaon.
IV. CAMELS

CAMELS is an internaonal bank-rang system where bank supervisory authories rate instuons according to 6
factors:
Capital Adequacy
Capital Adequacy
Asset Quality
Asset Quality
Liquidity
Liquidity
Management Quality
Management Quality
Earnings
Earnings
Senvity to Market Risk
Senvity to Market Risk
Capital Adequacy
+%;9%=' 
Management Quality
+' =''3$ @'%' 
'3-$
Asset Quality
*$- %$'% A%B&
Earnings
C3-$'' ;9C%  '3
Sensivity to Market Risk
9B -$-;9) %'% .B - 
'3--
Liquidity
7&-$ 3
 %% -'
CAMELS Objective


The purpose of CAMELS rangs is to determine a bank’s overall condion and to
idenfy its strength and weakness.

It’s a standardized method which allows the assessment of the banks quality
according to standard criteria to provide a meaningful rang.
ADVANTAGES

Contains 5 model measurement, help nd out the shortcomings more quickly

The indicators of CAMELS link closely together and help provide a wide view on connected events
aecng banks performance. Moreover, these indicators also have many applicaons

Provide a score system of 1 to 5 which help accurately assess the extent of problems

Help predict bankruptcy in banking system, somehow help pre-empt the risk of a global nancial
crisis.
DISADVANTAGES

The measurement relies heavily on the subjecve opinions of the analyst. Moreover, the nal
outcome may vary between banks and can easily changes over me

CAMEL analysis requires a team of qualied analysts who have enough capacity. Developing countries
like Viet Nam may have di<cules in nding such qualied employees.

Due to the condenality of banking system, the informaon used for CAMELS might be misleading
informaon. If the review is made based on such info, the result will be incorrect.
!$$)*+
/#$!)/#
$/#$#$0##

-
#-
$.$-
$!1!$+-
$$$
2
CAMEL in VIET NAM
Decision 400/2004-QĐ-NHNN
*%;)&&-*1D9<'
* B-*E-1%E-D9B -

Decision 06/2008-QĐ-NHNN
*1D9-%<

'< 40'

*< 0'

1%< 0'

D<  '

9B -< 4 0'
RATING SYSTEM OF CAMELS
TYPE SCORE (100) CRITERIA FOR EACH CRITERA
A
80
Not lower than 65% of maximum score
B
One criteria equal from 50% to 65% of max score

60 - 79
Not lower than 50% of maximum score
C
59
One criteria equal from 45% to 50% of max score
50 - 59
Not lower than 45% of maximum score
D
50
One criteria less than 45% of maximum score
TYPE SCORE (100) CRITERIA FOR EACH CRITERA
A
Not lower than 65% of maximum score
B
One criteria equal from 50% to 65% of max score
60 - 79
Not lower than 50% of maximum score
C
One criteria equal from 45% to 50% of max score
50 - 59
Not lower than 45% of maximum score
D
One criteria less than 45% of maximum score
A. Capital Adequacy












Chuẩn Vienbank Vietcombank
* ' B-
* /FGHI J " "
*
*!7KILFF
M J? ? ?
NM% 0' 0 0
B. Asset Management











Chuẩn VTB VCB
,
OPQR$S-LTPU$RLLR77+
$R 40'
,
2F PR$S-LTPU$RLLR$S-

77+$R67VLS 0? ? >?
, 7KIQ=O W? ? >?
NM% 0' 0 0
, OPQR$S%XGYP,W0? 0'
+Z'[S%RT$R67VF PR$SGYP W? 4 4
, \OLS]^S 0'
7L$S]_67VLS^S J0? >? >>?
NM% 0' 0 0
," OPQR$S%$`aS   
NM% 0'
C. Management Quality
a. Corporate Governance – 3 Points
•
Su<cient quanty of members, + 2'-, *&>0D'9<0
,b+02,
•
Fully issued, standardized internal regulaons
VIETCOMBANK

>%%,b+"
 (%&


0%%2,
VIETINBANK

%%, b+

%%2,
C. Management Quality

b. Internaonal Auding – 4 Points
•
Internal auding is directly under SB
•
Comply with size and scale of banks, eecve work, connuously control bank’s acvies and risks.
c. Legal Compliance – 6 Points
•
Strong internal unity
•
Members of BOD, BOM and SB obey laws and regulaons of State Bank, appropriately perform dues and authories
in managing and controlling the bank
d. Regulaons of State Bank about chartered capital – 2 Points
•
Minimum chartered capital required: 3 000 000 000 000 VND
•
VCB: 23 174 170 760 000 VND
•
Vienbank: 37 234 045 560 000 VND
Total: 15/15
Total: 15/15
D. Earning performance












Chuẩn VTB VCB
+ D'% '
+ !bD ? ?
NM% 0'  
+ NM%PcdaG^ eX
+ 7fI eXVg' ? ?
NM% '  
+
7fIg'[daG^ eX
QgPU` >? ?
NM% '  
7VGM% " "
E. Liquidity











Score VTB VCB
D hSiR- 0>? >?
NM% '  
D

7KIj XkFlaGPQj X
GM-L La W? ? """?
NM% '  
7VGM% 0 0