what is camel model

The CAMEL model is a rating system used by banking regulators to evaluate the soundness of financial institutions. CAMEL stands for Capital adequacy, Asset quality, Management quality, Earnings, and Liquidity. Each of these areas is evaluated on a scale of 1 to 5, with 1 being the strongest rating and 5 being the weakest. The CAMEL rating is used by regulators to determine if a financial institution is safe and sound enough to continue operating, and if any corrective action is needed to address weaknesses in any of the CAMEL areas.