BB can help improving strength of banks

Dr. Salehuddin on CAMELS rating

Rafiqul Islam Azad: Bangladesh Bank (BB) can help commercial banks to improve their financial strength by intensively applying the ‘early warning system’ under CAMELS rating, said Dr. Salehuddin Ahmed, former Governor of the central bank.
As the apex regulatory body for the country’s monetary and financial system, Bangladesh Bank can set a time limit for commercial banks to improve the poor areas of Capital, Asset, Management, Earning, Liquidity and Sensitivity to the market Risk (CAMELS) ratings to address their deficiencies and shortcomings, he said. The CAMELS Rating system adopted by the World Bank provides an accurate and consistent assessment of a lending agency’s financial condition and operations.
In an exclusive interview, the former central bank chief stated that commercial banks with poor ratings will hopefully be able to make progress in overcoming their deficiencies if they are given time.
If they repeatedly fail to maintain the lowest rating of 4, Bangladesh Bank may alert them of taking actions against the concerned bank including preventing them from opening new branches and refinancing, he observed.
Dr. Salehuddin Ahmed, however, mentioned that Bangladesh Bank should regularly engage in consultations with banks with poor CAMELS Ratings to help them address their deficiencies and shortcomings.
The measures taken by Bangladesh Bank, as the apex regulatory body for the country’s monetary and financial system, can assist these banks in making progress to improve their ratings, he added.
In response to a question, he noted that nationalized banks always have the lowest ratings and do not receive sufficient attention from authorities to enhance their financial strength.
CAMELS Rating analysis assessment of capital adequacy, asset quality, management pattern, earning capacity and liquidity position of a bank or financial institution.
It is worth mentioning that CAMELS Rating have five categories- 1 for strong, 2 for satisfactory, 3 for fair, 4 for marginal and 5 for unsatisfactory.