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To anticipate the bankruptcy of Baoshang Bank based on CAMELS rating system

Author

Listed:
  • Lina Song

    (Universiti Sains Malaysia, School of Management)

  • Amirul Shah Md Shahbudin

    (Universiti Sains Malaysia, School of Management)

Abstract

On 7 February 2021, the Baoshang Bank was declared bankrupt, which raised concerns about the sustainability of the Chinese financial system. This study intends to assess the usefulness of the CAMELS system in predicting the bankruptcy of Chinese banks and reach the causes of the bank collapse according to the system. The findings reveal that the CAMELS framework could be able to predict the bankruptcy of Baoshang Bank, and that the asset emptying of Baoshang Bank by Tomorrow Group is the bank’s primary cause of insolvency. The supervisory authorities should have also realised that Baoshang Bank was showing multiple indicators of collapse and taken strong measures to prevent the bank’s bankruptcy. This paper contributes to the current literature on bank failure and predictive models by employing the CAMELS model. Additionally, regulatory authorities are interested in forecasting bank failure so that they can intervene in the crisis.

Suggested Citation

  • Lina Song & Amirul Shah Md Shahbudin, 2023. "To anticipate the bankruptcy of Baoshang Bank based on CAMELS rating system," Bank i Kredyt, Narodowy Bank Polski, vol. 54(1), pages 65-88.
    • Handle: RePEc:nbp:nbpbik:v:54:y:2023:i:1:p:65-88
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    CAMELS; bankruptcy prediction; Chinese commercial banks; Boashang Bank; bankruptcy predictors;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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