A Research of Why CAMEL Lose Warning Ability When Financial Tsunami Coming－A case study of Citibank

• Main Authors: Chi-Ting Wei, 魏綺廷
• Other Authors: 沈中華
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/79897030358037414838

碩士 === 國立臺灣大學 === 財務金融學研究所 === 98 === When facing financial tsunami, many banks suffered from crisis of bankruptcy. However, when we view capital adequacy ratio in those banks, most of them were above minimum requirement. Even they had such sufficient capital adequacy ratio, many banks went bankruptcy quickly. Some people suggested that rising capital adequacy ratio to face next financial crisis. In fact, this argument does not understand the core of the problem, because many banks’ capital adequacy ratio was above 10%. Thus, I think this suggestion cannot solve the problem. The purpose of this study is to check soundness of major method of banking–CAMEL by studying case of Citibank. Furthermore, I would propose amendment on financial supervisory based on the core reason of huge loss in banks. I hope I can provide effective methods for financial supervisory authority to prevent next financial crisis. This research took case study approach. I checked performance of Citibank by CAMEL model, basing on the outcome to propose my suggestion and gave financial supervisory authority directions and methods on financial supervision reference in the future. I discovered that CAMEL model cannot point out Citibank’s problem and why it suffered more in this financial tsunami. Thus, I propose three amendments on financial supervision: First, capital adequacy ratio of Basel II cannot supervise capital adequacy effectively. We have to supervise capital adequacy through double indicators, including capital adequacy ratio of Basel II and equity to asset ratio. I believed that if government authority can use two indicators to supervise financial institutions, it can require banks to raise its capital timely and prevent insufficient capital adequacy. Second, balance sheet cannot fully reflect all operating status. From Citibank case, I observed that the problem was not from balance sheet but off- balance sheet. Thus, financial supervisory authority should put more weight on off- balance sheet and evaluate its possible risks and loss. Third, categorizing banks into simplified bank and complicated bank and give them different supervision indicators. I discovered that banks can be divided into two types. Balance sheet of simplified bank can reveal 80% of its operating status and business. However, complicated bank cannot tell its potential risk and loss through its balance sheet. These two types of banking operations are on the disparity, so the two types of banks should adopt different supervision models.