Thuyết trình CAMELS and PEARLS application to financial management of commercial banks

CAMELS and PEARLS: application
to
financial management of
commercial banks
Banking Management 2
Class: Banking , Intake: 56
Group: 10


Group members:

1. VU NHAT ANH
2. DUONG QUOC HUNG
3. VU HA LINH
4. LA THU PHUONG
5. GIANG VIET TUNG


OUTLINE

 I. OVERVIEW: CAMELS & PEARLS
 II. application to financial management of commercial banks:
vietcombank.


I. Overview: camels & pearls

 
Similarity

CAMELS

PEARLS

The system of assessing the strength of a financial institution.
The assessment is based on 6 factors, including common factors: Asset
Quality, Liquidity.


I. Overview: camels & pearls

CAMELS
Speciality

CAMELS stands for :

- Capital Adequacy: Capital adequacy,
- Asset Quality: Asset quality,
- Management competence: Management level,
- Earnings strength: Profits,
Liquidity risk:
- Sensitivity to market risk: Sensitivity to market risk.

PEARLS
PEARLS stands for:

_Protection
_Effective Financial Structure
_Asset Quality
_Rates of Returns and Costs
_Liquidity

_Signs of Growth.


I. Overview: camels & pearls
CAMELS

Speciality

PEARLS

_These are the six elements of an assessment system

_A system designed to monitor the financial performance of particular institutions,

that examines and monitors the level of safety and

particularly small-scale financial institutions.

robustness of commercial banks, are set in the US

_It is considered a necessary tool for regulators to monitor, alert and rate member

Federal Deposit Insurance Corporation Act 1991 (FDICIA).

financial institutions.

_In fact, the later CAMELS rating system is also

_PEARLS uses a set of financial criteria and evaluation criteria closely related to

extensively applied to financial institutions in

each other, evaluates this indicator, considers the impact of other indicators and vice

general.

versa.

Most US banks must submit this verification report

_PEARLS: is mainly based on data from the balance sheet of accounts -> PEARLS is

annually to the state or federal regulator. Small banks or

very convenient for exploiting the input data and is suitable for information exploitation,

strong capital base are required to submit a 1.5-year

reports from financial institutions of Vietnam.

report.

_This model has been studied by the International Credit Union (WOCCU) as a surveillance
model since the late 1980s.


I. Overview: camels & pearls

CAMELS

DIFFERENCES

PEARLS

_CAMELS also use qualitative criteria (M-manager).

_PEARLS completely uses quantitative criteria.

_CAMELS uses data as a statistical report from financial

_PEARLS is primarily based on data from the balance

institutions members.

of accounts.

_CAMELS is being used as the official monitoring method of

_PEARLS also measures growth (S).

state management agencies


II. Application

to financial management of commercial banks:
vietcombank.

1. Overview: vietcombank:
Trading name

Vietcombank

Native name

Ngân hàng Ngoại thương Việt Nam

Type

Joint stock bank

Industry

Banking and Finance

Founded

1 April 1963


II. Application

to financial management of commercial banks:
vietcombank.
1. C-Capital adequacy:



Capital adequacy is measured by the raito of capital risk weighted assets.

1.1. Equity


II. Application

to financial management of commercial banks:
vietcombank.

1. C-Capital adequacy:
1.2. Charter capital:



1.State bank of Vietnam:



+ Number of share: 2,724,353,387



+ Holding: 77.11%



2.Mizuho bank :



+ Number of share: 539,668,502



+ Holding: 15%



3. Other shareholder:



+ Number of share: 283,746,686



+ Holding : 7,9%



Charter capital of VCB : 35,977,685750,000 dong



Legal capital in Vietnam : 3,000 bill dong


II. Application

to financial management of commercial banks: vietcombank.

1. C-Capital adequacy:

1.3. Capital adequacy analysis criteria:
1.3.1.Capital Adequacy Ratio (CAR) :
CAR in VietNam follow by Decision 13/2010 by State bank of Vietnam.
CAR > 9%.

 

2011

2012

2013

2014

2015

=> VCB had met the requirement of Vietnamese state bank about CAR from 2010. In the following years, the index was
CAR(%)
11,14
14,83
13,37
11,61
11,04
extremely high.


II. Application

to financial management of commercial banks:
vietcombank.

1. C-Capital adequacy:
1.3. Capital adequacy analysis criteria:
1.3.2. Loans/Deposits ratio:



December 31, 2015: Customer deposits

increased 18.7 %, and customer loans
increased 19.9% in comparison with 31/12/2014.



Loans outstanding at 31/12/2015

reached 387.7 bill dong,
up 10.2% compared with 31.12.2014;
Loans/Deposits ratio increased 0.8%
compared with the end of 2014.


II. Application

to financial management of commercial banks:
vietcombank.
2. A-Asset Quality



2.1: 1. The quality of loans: Compared with banks that have the same size as BIDV,

Vietinbank.

Chart Title

Loan structure:

Vietcombank

BIDV

Vietinbank


II. Application

to financial management of commercial banks:

vietcombank.
2. A-Asset Quality



2.1: 1. The quality of loans: Compared with banks that have the same size as BIDV, Vietinbank.

Bad debt/Credit balance

0.02
0.02

0.01


II. Application

to financial management of commercial banks:

vietcombank.
2. A-Asset Quality



2.1: The quality of loans: Compared with banks that have the same size as BIDV, Vietinbank.

PLL/Credit balance

0.02

0.01
0.01


II. Application

to financial management of commercial banks:
vietcombank.

Structure of profitable assets
2. A-Asset Quality



2.2 The quality of Portfolio:



Portfolio (profitable assets) includes: Deposits,
loans or investments (excluding non-recoverable
debts).



17%

3%
21%

Profitable assets/Total Assets

( of VCB in 2015) = 95,11%

59%

Cash due from Central Bank
Cash due from other depository institutions
Loans

Securities and funds


II. Application

to financial management of commercial banks: vietcombank.

3. M-Management quality
Characteristics of successful bank management



- Ability



- Leader



- Compliance with regulations



- Ability to plan



- Ability to cope with changes in the surrounding environment



- The quality of policies and the ability to control policy compliance


II. Application

to financial management of commercial

banks: vietcombank.
4. E –Earning



Respecting the business environment is an integral part of the results of business operations. In addition, the wind
generates wind turbines, which provides an economical and economical solution for the wind farm. Earnings will be used
to send invitations, prizes, invitations and other invitations. Hence, it is important to gauge the effectiveness of the
operation of commercial banks.



CBs have 4 revenue sources:



+ Income from capital



+ Income from commission



+ Income from business activities



+ Other income


II. Application

to financial management of commercial banks:

vietcombank.
4. E – Earning:
The most important feature of a product is its size, its size and its weight.


II. Application

to financial management of commercial banks:

vietcombank.
4. E – Earning:

In 2016, Vietcombank's ROA and ROE ratios were high at 0.9% and 14.2%.


II. Application

to financial management of commercial banks:

vietcombank.

5. L – Liquidity risk exposure



Liquidity risk exposure : is generally defined as the ability of a financial firm to meet its debt obligations without
incurring unacceptably large losses

Liquidity risk management :



Keep percent of cash



Short term capital used long term credit minimum



Maintain Reseve ratio for each deposit



II. Application

to financial management of commercial banks:

vietcombank.
Criteria


CASH: cash and due from deposit institutions/ total assets



Liquidity securities: government securities/ Total assets



Making loans: gross loans and leases/ Total assets



Shorterm investment/ sensitive capital



Deposit structure: payment/ deposit

Chỉ tiêu

2014

2015

2016

Chỉ số trạng thái tiền mặt

0.29

0.24

0.23

Chỉ số chứng khoán thanh khoản

0.0035

0.0046

0.0096

Chỉ số năng lực cho vay

0.56

0.56

0.57

Tỷ số đầu tư ngắn hạn/vốn nhạy cảm

0.51

0.52

0.77

Chỉ số cấu trúc tiền gửi

0.45

0.39

0.40

Tỷ lệ tín dụng/ tiền gửi

0.67

0.66

0.68


II. Application

to financial management of commercial banks:

vietcombank.

6. S – SENSITIVITY TO MARKET RISK
1.

INTEREST RISK
THE CHANGE OF INTEREST IN MARKET

2.

EXCHANGE RATE RISK

SELL AND BUY FOREIGN CURRENCIES
INTERNATIONAL PAYMENT OPERATION


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