Number of studies has been conducted about the use of CAMEL model.

And number of
reviews on the previous researches is present but due to paucity of time, a few snapshots
of literature are given here.
Swindle, C, (1995) This study uses the capital adequacy component of the CAMEL rating
system to assess whether regulators in the 1980s influenced inadequately capitalized
banks to improve their capital. Using a measure of regulatory pressure that is based on
publicly available information, I find that inadequately capitalized banks responded to
regulators' demands for greater capital. This conclusion is consistent with that reached by
Keeley (1988). Yet, a measure of regulatory pressure based on confidential capital
adequacy ratings reveals that capital regulation at national banks was less effective than
at state-chartered banks.
Cole, Rebel A. and Gunther(1995)Their findings suggest that, if a bank has not been
examined for more than two quarters, off-site monitoring systems usually provide a more
accurate indication of survivability than its CAMEL rating. The lower predictive
accuracy for CAMEL ratings "older" than two quarters causes the overall accuracy of
CAMEL ratings to fall substantially below that of off-site monitoring systems. The higher
predictive accuracy of off-site systems derives from both their timeliness-an updated offsite rating is available for every bank in every quarter-and the accuracy of the financial
data on which they are based. Cole and Gunther conclude that off-site monitoring
systems should continue to play a prominent role in the supervisory process, as a
complement to on-site examinations.
Gilbert R., Meyer A., & Vaughan M. (2000) This article examines the potential
contribution to bank supervision of a model designed to predict which banks will have
their supervisory ratings downgraded in future periods. Bank supervisors rely on various
tools of off-site surveillance to track the condition of banks under their jurisdiction
between on-site examinations, including econometric models. One of the models that the
Federal Reserve System uses for surveillance was estimated to predict bank failures. The

number of banks downgraded to problem status in recent years has been substantially
larger than the number of bank failures. During a period of few bank failures, the
relevance of this bank failure model for surveillance depends to some extent on the
accuracy of the model in predicting which banks will have their supervisory ratings
downgraded to problem status in future periods. This paper compares the ability of two
models to predict downgrades of supervisory ratings to problem status: the Board staff
model, which was estimated to predict bank failures, and a model estimated to predict
downgrades of supervisory ratings. We find that both models do about as well in
predicting downgrades of supervisory ratings for the early 1990s. Over time, however,
the ability of the downgrade model to predict downgrades improves relative to that of the
model estimated to predict failures. This pattern reflects the value of using a model for
surveillance that can be re-estimated frequently. We conclude that the downgrade model
may prove to be a useful supplement to the Board's model for estimating failures during
periods when most banks are healthy, but that the downgrade model should not be
considered a replacement for the current surveillance framework.
Lacewell, Stephen Kent(2001).Stage one in the estimation of cost and alternative profit
efficiency scores using a national model and a size-specific model. Previous research
referred in the paper asserts that an efficiency component should be added to the current
CAMEL regulatory rating system to account for the ever-increasing diverse components
of modern financial institutions. Stage two is the selection and computation of financial
ratios deemed to be highly correlated with each component of the CAMEL rating. The
research shows that there is definitely a relationship between bank efficiency scores and
financial ratios used to proxy a bank's CAMEL rating. It is also evident that certain types
of efficiency models are better suited to large banks than to small banks and vice versa.
Richard S Barr, Kory A Killgo, Thomas F Siems, & Sheri Zimmel. (2002)This study
reviews previous research on the efficiency and performance of financial institutions and
uses Siems and Barr's (1998) data envelopment analysis (DEA) model to evaluate the
relative productive efficiency of US commercial banks 1984-1998. It explains the
methodology, discusses the input and output measures used and relates bank performance

measures to efficiency. It describes the CAMEL rating system used by bank examiners
and regulators; and finds that banks with high efficiency scores also have strong CAMEL
ratings. The study summarizes the other relationship identified and recommends the use
of DEA to help analysts and policy makers understand organizations in greater depth,
regulators and examiners to develop monitoring tools and banks to benchmark their
processes.
Godlewski (2003)has tested the validity of the CAMEL rating typology for bank's default
modification in emerging markets. He focused explicitly on using a logical model applied
to a database of defaulted banks in emerging markets. He found that the principle results
of the early warning signals models follow the CAMEL typology. The proxy variables of
bank solvability, assets' quality and liquidity, particularly loan losses provisions,
management quality, profitability, and intermediation rate have a negative impact on the
one year probability of bank's default.
Said and Saucier (2003) examined the liquidity, solvency and efficiency of Japanese
Banks. Using CAMEL rating methodology, for a representative sample of Japanese banks
for the period 1993-1999, they evaluated capital adequacy, assets and management
quality, earnings ability and liquidity position. They quantified banks managerial quality
by calculating X-inefficiency using data envelopment analysis (DEA). Results support
the view that the major problem of failed banks was not inefficiency of management, but
below standard capital adequacy and considerable problems in their assets quality.
Significantly above average efficiency of ailing banks could be explained by a survival
strategy that pushed them to drastically improve management.
Derviz et al. (2004)investigated the determinants of the movements in the long term
Standard &Poors and CAMEL bank ratings in the Czech Republic during the period
when the three biggest banks, representing approximately 60%of the Czech banking
sector's total assets, were privatized (i.e., the time span1998-2001). The same list of
explanatory variables corresponding to the CAMEL rating inputs employed by the Czech
National Bank's banking sector regulators were examined for both ratings in order to

select significant predictors among them. They employed an ordered response log it
model to analyze the monthly long-run S&P rating and a panel data framework for the
analysis of the quarterly CAMEL rating.
Gasbarro et al. (2004)examined the changing financial soundness of Indonesian banks
during the crisis. During the recent Southeast Asian financial crisis, numerous banks
failed quickly and unexpectedly. This study used a unique data set provided by Bank
Indonesia to examine the changing financial soundness of Indonesian banks during this
crisis. Bank Indonesia's non-public CAMEL ratings data allowed the use of a continuous
bank soundness measure rather than ordinal measures. They argued that the nature of the
risks facing the Indonesian banking community calls for the addition of a systemic risk
component to the Indonesian ranking system. The empirical results show that during
Indonesia's stable economic periods, four of the five traditional CAMEL components
provided insights into the financial soundness of Indonesian banks.
Baral (2005) analysed the performance of joint ventures banks in Nepal on the basis of
CAMEL Model. For the purpose of the study data set published by joint venture banks in
their annual reports was used. This paper examined the financial health of joint venture
banks in the CAMEL framework. The health check up was conducted on the basis of
publicly available financial data. It concluded that the health of joint venture banks is
better than that of the other commercial banks. In addition, the perusal of indicators of
different components of CAMEL indicated that the financial health of joint venture banks
was not so strong to manage the possible large scale shocks to their balance sheet and
their health was fair.
Kapil (2005)examined the relationship between the CAMEL ratings and the bank stock
performance. The viability of the banks was analyzed on the basis of the Offsite
Supervisory Exam ModelCAMEL Model. The M for Management was not considered
in this paper because all Public Sector Banks, (PSBs) were government regulated, and
also because all other four componentsC, A, E and Lreflect management quality. The
remaining four components were analyzed and rated to judge the composite rating. Part A

of the study analyzed the inter bank performance by determining their CAEL composite
score. Part B of the study assessed the relation between the banks composite CAMEL
ratings with the banks stock performance. The paper revealed that the Off-site
Supervisory Exam Model, CAMEL, is related to the banks stock performance in the
capital market.
Hirtle and Lopez, (2005),This research paper was carried out; to find the adequacy of
CAMEL in capturing the overall performance of a bank; to find the relative weights of
importance in all the factors in CAMEL; and lastly to inform on the best ratios to always
adopt by banks regulators in evaluating banks' efficiency. In addition, the best ratios in
each of the factors in CAMEL were identified. For example, the best ratio for Capital
Adequacy was found to be the ratio of total shareholders' fund to total risk weighted
assets. The paper concluded that no one factor in CAMEL suffices to depict the overall
performance of a bank. Among other recommendations, banks' regulators are called upon
to revert to the best identified ratios in CAMEL when evaluating banks performance.
Sarker (2005) examined the CAMEL model for regulation and supervision of Islamic
banks by the central bank in Bangladesh. With the experience of more than two decades
the Islamic banking now covers more than one third of the private banking system of the
country and no concerted effort has been made to add a Shariah component both in onsite and off-site banking supervision system of the central bank. Rather it is being done
on the basis of the secular supervisory and regulatory system as chosen for the traditional
banks and financial institutions. To fill the gap, an attempt had been made in this paper to
review the CAMEL standard set by the BASEL Committee for off-site supervision of the
banking institutions. This study enabled the regulators and supervisors to get a Shariah
benchmark to supervise and inspect Islamic banks and Islamic financial institutions from
an Islamic perspective.