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CAMELS- Capital, Asset quality, Management, Earning, Liquidity and sensitivity to market risk.

CAMELS- Capital, Asset quality, Management, Earning, Liquidity and sensitivity to market risk.

 

The banking system is regarded as the back bone of economy. Not only does it provide easy equity solutions to the common man, it gives support to the government too. Due to such hefty importance of the banking sector, the sector is watched over acutely by analyst and the likes. The functioning of banks always finds mention in the government circles and various policies are regulated by public and private players.

Given such a wide array of importance, it becomes a liability of the bank that it is diligent towards its customers and clients. The recent economic crisis showed how power can be abused and blinded by profits, how an organisation can pursue hoax goals to spur up the balance sheets. Ultimately, it is not only the banks that go down but its hopes and even more than that it’s the lives of people which are affected by such practices. In the modern day world, the diligence of bank goes to the next level.

Not only is the bank responsible for the growth and prosperity of the nation, it is also responsible of drawing a line somewhere. To strike the right balance between risk and safety is something that is expected out of all banking institutes no matter how big or small. People invest in banks not only to keep their money safe but also get handsome returns on their investment. The pursuit of that ‘extra’ is something that is common to the entire human race, a genome called ‘greed’ that runs through our entire race. However, no matter which business model you analyse, no global organisation has become truly great without finding the right mix of risk and safety.

It is not an easy job for the banks but given the power and responsibility vested in the banking sector and also the fact that it has the sharpest minds working day in and day out, it should not be too hard for the bank to show  diligence in its  functioning, now, and always. The concept of average is not important, as it is being said if you head is in the sun and you are sitting on a block of ice-your average body temperature is probably okay- but average is a useless measure. Benchmark the best, not the average.

The concept of CAMELS- Capital, Asset quality, Management, Earning, Liquidity and sensitivity to market risk are the fundamentals, which cannot be skipped. Present financial crisis can be something to learn form, so as not to get it repeated in future.

Robin Trehan can be reached at www.Keyfunds.com or CreditCapitalFunding.com