CAMELS Rating System Analysis of Bangladesh Bank in Accordance with BRAC Bank Limited
AuthorDatta, Rahul Kanti
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The internship report is completely based on my internship program in BRAC Bank Limited. I have successfully completed my internship program from BRAC Bank Ltd. under Finance Division. It was twelve months long internship program which I started from 7th September, 2011 to 5th December, 2011. I did this internship program because it is a requirement for the BBA program in BRAC University. In my internship period, I worked in Regulatory Reporting of Finance Division. It was a great experience to me that I achieved much knowledge about the different types of banking reports. All employees of Regulatory Reporting were very helpful and they accept me cordially and prefer me as a part of their team member. My faculty advisor and the on-site supervisor helped me choose the topic- “CAMELS Rating System Analysis of Bangladesh Bank in Accordance with BRAC Bank Limited”. CAMELS Rating System is an international bank-rating system where bank supervisory authorities rate institutions according to six factors. It is encountered by six components named capital adequacy, asset quality, management competence, earnings, liquidity and sensitivity to market risk. It is used for banking companies to know about their financial condition, overall soundness of the banks, and predict different risk factors that may contribute to turn the bank into a problem. CAMEL first founded in 1979 and in 1996 CAMEL became CAMELS with the addition of a component grade for the Sensitivity of the bank to market risk. In Bangladesh, the five components of CAMEL have been used for evaluating the bank’s operations that reflect in a complete institution’s financial condition, compliance with banking regulations and statutes and overall operating soundness since the early nineties. In 2006, Bangladesh Bank has upgraded the CAMEL into CAMELS and included ‘Sensitivity to market risk’ or ‘S’ which make CAMEL into CAMELS. It has 1 through 5 rating for each of these components and a composite rating where the rating of 1 indicates strong performance or best rating, 2 reflects satisfactory performance, 3 represents performance that is flawed to some degree, 4 refers to marginal performance and is significantly below average and 5 is considered as unsatisfactory or worst rating. In Bangladesh, CAMELS rating is followed by all commercial as a recommendation of Bangladesh Bank. BRAC Bank Ltd. also makes report on CAMELS rating internally and externally. Bangladesh Bank evaluates CAMELS rating where BBL issue all necessary reports. BBL is a ‘B’ category bank in Bangladesh according to CAMELS rating system of Bangladesh Bank. It is in satisfactory position in 2010 by holding rating 2. Although it is in strong position in capital adequacy and earnings, but it is not in good position in asset quality, management quality and liquidity. So, it is ‘B’ category bank in Bangladesh. Now BBL is planning to include CAMELS’s new component named sensitivity to market in their CAMELS rating system which will make their rating system more efficient and effective. They do not yet use any quantitative factors to evaluate the new components of CAMELS rating system named sensitivity to market.