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... application to financial management of commercia

CAMELS and PEARLS: application

to financial management of

commercial banks

Banking Management 2 Class: Banking , Intake: 56

Group: 10

 II application to financial management of commercial banks: vietcombank.

I Overview: camels & pearls

The assessment is based on 6 factors, including common factors: Asset Quality, Liquidity.

I Overview: camels & pearls

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 stands for:

I Overview: camels & pearls

Speciality _These are the six elements of an assessment system

that examines and monitors the level of safety and robustness of commercial banks, are set in the US

Federal Deposit Insurance Corporation Act 1991 (FDICIA).

_In fact, the later CAMELS rating system is also

extensively applied to financial institutions in general.

Most US banks must submit this verification report annually to the state or federal regulator Small banks or

strong capital base are required to submit a 1.5-year

report.

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

particularly small-scale financial institutions.

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

financial institutions.

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

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

versa

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

very convenient for exploiting the input data and is suitable for information exploitation, reports from financial institutions of Vietnam

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

I Overview: camels & pearls

DIFFERENCES _CAMELS also use qualitative criteria (M-manager).

_CAMELS uses data as a statistical report from financial

institutions members.

_CAMELS is being used as the official monitoring method of

state management agencies

_PEARLS completely uses quantitative criteria.

_PEARLS is primarily based on data from the balance

of accounts.

_PEARLS also measures growth (S)

II A pplication to financial management of commercial banks: vietcombank.

1 Overview: vietcombank:

II A pplication 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 A pplication to financial management of commercial banks: vietcombank.

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

 Legal capital in Vietnam : 3,000 bill dong

II A pplication 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.

II A pplication 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 A pplication to financial management of commercial banks: vietcombank.

II A pplication to financial management of commercial banks:

II A pplication to financial management of commercial banks: vietcombank.

II A pplication to financial management of commercial banks: vietcombank.

2 A-Asset Quality

 2.2 The quality of Portfolio:

 Portfolio (profitable assets) includes: Deposits,

loans or investments (excluding non-recoverable

Structure of profitable assets

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

Securities and funds

II A pplication to financial management of commercial banks: vietcombank.

 - Ability to cope with changes in the surrounding environment

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

II A pplication to financial management of commercial

 CBs have 4 revenue sources:

 + Income from capital

 + Income from commission

 + Income from business activities

 + Other income

II A pplication 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 A pplication 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 A pplication 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 A pplication 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

II A pplication 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

Thank you for listening!