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CAMELS-based Determinants for the Credit Rating of Turkish Deposit Banks

Author

Listed:
  • Serhat Yuksel

    (Ph.D. in Finance, Departmentof Board of Auditors, Finansbank, Istanbul)

  • Hasan Dincer Author-Workplace-Associate Professor of Finance, School of Business and Management Sciences
  • Umit Hacioglu

    (Associate Professor of Finance, School of Business and Management Sciences)

Abstract

This paper demonstratesthe relationship between CAMELS ratios and credit ratings of deposit banks in Turkey. Annual data was used for the period between 2004 and 2014 in this study. Moreover, 20 deposit banks of Turkey were analyzed and 21 different ratios of CAMELS components were used. In addition to that, credit ratings of these banks were provided from Moody’s corporation or annual activity reports of the banks. After that, we created multi nominal logistic regression analysis in order to illustrate therelationship. The major finding in this study is that threecomponents (Asset Quality, Management Quality, and Sensitivityto Market Risk) of CAMELS have effectson credit ratings whereas the ratios related to Capital Adequacy and Earnings are not effective. As a result, it was recommended that Turkish deposit banks should concentrate on the percentage of fixed assets and interest income to have a better rating. Moreover, having high market share with respect to total assets and lower interest expense are also other important points for this purpose. On the other hand, Turkish deposit banks should control the proportion of financial assets and increase the amount of FX liquid assets to prevent credit ratings to decrease. Additionally, market share of banks for loans should not reach at high level for this objective.

Suggested Citation

  • Serhat Yuksel & Hasan Dincer Author-Workplace-Associate Professor of Finance, School of Business and Management Sciences & Umit Hacioglu, 2015. "CAMELS-based Determinants for the Credit Rating of Turkish Deposit Banks," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 4(4), pages 01-17, October.
    • Handle: RePEc:rbs:ijfbss:v:4:y:2015:i:4:p:01-17
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    References listed on IDEAS

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    Cited by:

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    2. Serhat Yuksel & Mustafa Ozsari, 2017. "Identifying the Factors Influence Turkish Deposit Banks to Join Corporate Social Responsibility Activities by Using Panel Probit Method," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 39-50, January.
    3. Silim Arafa & Pastory Dickson, 2022. "Effect of treasury single account (TSA) on the financial performance of commercial banks in Tanzania: A study based on CAMEL rating analysis," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(2), pages 172-182, March.
    4. Md. Zahidur Rahman & Md. Shohidul Islam, 2018. "Use of CAMEL Rating Framework: A Comparative Performance Evaluation of Selected Bangladeshi Private Commercial Banks," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(1), pages 120-128, January.
    5. Serhat Yuksel & Hasan Dincer & Senol Emir, 2017. "Comparing the performance of Turkish deposit banks by using DEMATEL, Grey Relational Analysis (GRA) and MOORA approaches," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 3(2), pages 26-47, December.
    6. Hasan Dincer & Umit Hacioglu & Serhat Yuksel, 2020. "Balanced scorecard-based performance assessment of Turkish banking sector with the Analytic Network Process (ANP)," International Journal of Decision Sciences & Applications (2528-956X), Center for the Strategic Studies in Business and Finance, vol. 1(1), pages 01-12, December.
    7. Fangyuan Guan & Chuanzhe Liu & Fangming Xie & Huiying Chen, 2019. "Evaluation of the Competitiveness of China’s Commercial Banks Based on the G-CAMELS Evaluation System," Sustainability, MDPI, vol. 11(6), pages 1-24, March.
    8. Babatunde Rahman YUSUF & Jamiu Olakunle TIJANI, 2019. "An Evaluation of Financial Health of Nigerian Deposit Money Banks using CAMELS Rating Model," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 48-61.
    9. Serhat Yuksel & Sinemis Zengin, 2016. "Identifying the Determinants of Interest Rate Risk of the Banks," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 5(6), pages 12-28, October.
    10. Serhat Yüksel & Shahriyar Mukhtarov & Elvin Mammadov & Mustafa Özsarı, 2018. "Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries," Economies, MDPI, vol. 6(3), pages 1-15, July.

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