The financial soundness of selected banks in South Africa: a camels rating system approach
- Authors: Manga, Rushil Mohan
- Date: 2019
- Subjects: Bank failures -- South Africa , Banks and banking -- Risk management , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/40889 , vital:36258
- Description: Bank failure continues to feature in South Africa and although it is not uncommon, nor limited to any single country, it has the potential to have significant systemic risks. It is, therefore of the utmost importance to mitigate bank failure where possible. Bank supervision plays a key role in ensuring that individual banks, and the banking sector, remain sound. This study analysed seven selected banks in South Africa namely, ABSA, African Bank, Capitec Bank, FirstRand Bank, Nedbank, Standard Bank and VBS Mutual Bank. The CAMELS rating system was applied to evaluate the component and composite ratings for each selected bank. The empirical evidence exhibited that the CAMELS model has been used world-wide and proved valuable in its simplicity and reliability. The results showed that all banks achieved a rating of three or fair, with the exception being African Bank. African Bank, rated four or marginal, continues to struggle to regain market confidence since its cu0ratorship and restructuring. The study further showed that among the selected banks, management quality and liquidity were two components that consistently showed critical weaknesses, which posed concerns for formal supervision. The study utilised One-way ANOVA (Analysis of Variance) to analyse the results of the CAMELS model. It was found that there was no significant difference in the financial soundness of the selected banks as a measure of the CAMELS model. The study further recommended that the banks invest and focus on developing human resource departments to attain and retain high quality managers in terms of qualifications and experience. The banks’ internal policies need to align, not only with the company’s business targets, but also the personal contentment and fulfilment of employees and managers. This will help reduce frictional unemployment in the banking sector. It must be noted that Capitec was the only bank to avoid a marginal or weak rating in the management quality component. To address the poor rating awarded to the liquidity component in all selected banks, it is recommended that senior management, regulators and supervisors need to work together to implement sound liquidity management practices. The CAMELS model presents a clear depiction of the financial soundness of a bank and can be comparable to other competitive banks within a country. For this reason, the model would be easily understandable, not only to supervisors and senior management, but also investors, stake-holders, their customers and the general population. It is therefore recommended that the SARB publishes a detailed annual report, which analyses all banks in South Africa by way of the CAMELS model.
- Full Text:
- Date Issued: 2019
- Authors: Manga, Rushil Mohan
- Date: 2019
- Subjects: Bank failures -- South Africa , Banks and banking -- Risk management , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/40889 , vital:36258
- Description: Bank failure continues to feature in South Africa and although it is not uncommon, nor limited to any single country, it has the potential to have significant systemic risks. It is, therefore of the utmost importance to mitigate bank failure where possible. Bank supervision plays a key role in ensuring that individual banks, and the banking sector, remain sound. This study analysed seven selected banks in South Africa namely, ABSA, African Bank, Capitec Bank, FirstRand Bank, Nedbank, Standard Bank and VBS Mutual Bank. The CAMELS rating system was applied to evaluate the component and composite ratings for each selected bank. The empirical evidence exhibited that the CAMELS model has been used world-wide and proved valuable in its simplicity and reliability. The results showed that all banks achieved a rating of three or fair, with the exception being African Bank. African Bank, rated four or marginal, continues to struggle to regain market confidence since its cu0ratorship and restructuring. The study further showed that among the selected banks, management quality and liquidity were two components that consistently showed critical weaknesses, which posed concerns for formal supervision. The study utilised One-way ANOVA (Analysis of Variance) to analyse the results of the CAMELS model. It was found that there was no significant difference in the financial soundness of the selected banks as a measure of the CAMELS model. The study further recommended that the banks invest and focus on developing human resource departments to attain and retain high quality managers in terms of qualifications and experience. The banks’ internal policies need to align, not only with the company’s business targets, but also the personal contentment and fulfilment of employees and managers. This will help reduce frictional unemployment in the banking sector. It must be noted that Capitec was the only bank to avoid a marginal or weak rating in the management quality component. To address the poor rating awarded to the liquidity component in all selected banks, it is recommended that senior management, regulators and supervisors need to work together to implement sound liquidity management practices. The CAMELS model presents a clear depiction of the financial soundness of a bank and can be comparable to other competitive banks within a country. For this reason, the model would be easily understandable, not only to supervisors and senior management, but also investors, stake-holders, their customers and the general population. It is therefore recommended that the SARB publishes a detailed annual report, which analyses all banks in South Africa by way of the CAMELS model.
- Full Text:
- Date Issued: 2019
A framework to investigate risk management in commercial banks
- Authors: Fick, William
- Date: 2012
- Subjects: Banks and banking -- Risk management , Risk management , Asset-liability management
- Language: English
- Type: Thesis , Masters , MTech
- Identifier: vital:9288 , http://hdl.handle.net/10948/d1009429 , Banks and banking -- Risk management , Risk management , Asset-liability management
- Description: Businesses are continuously exposed to a changing business environment which may either exert positive or negative influences on profitability. The banking industry, in particular, is highly competitive and bank failures can have significant consequences for customers. Commercial banks, therefore, have a responsibility to protect their customers by implementing sound risk management strategies. In light of the recent financial crises (since 2007), risk management has once again become a popular topic of discussion since adequate risk management should have prevented or minimised the impact of the risks faced by failed banks. The primary objective of this study was to develop a framework that could be used by South African commercial banks to investigate risk management. Qualitative research was conducted in this regard. From this, findings and recommendations were derived in order to provide banks with a tool by which they could assess their exposure to risk. Various journals, websites, newspapers, bank reports and textbooks were consulted in support of the literature. The literature provided background information on the history and development of the risk management process. Considerable attention was given to the categories of risk that an adequate risk management framework should address. Furthermore, the current models used to manage risk in commercial bank were provided, as well as the specific reasons for bank failures. The main findings of this study were the identification of the most significant reasons for banking failures. These were identified as capital inadequacy, credit risk due to non-performing loans and a lack of banking supervision. In addition to these reasons, several other contributing principles were identified as important factors to be included in a risk management framework. A risk management framework was thus constructed in Table 5.1 based on the literature regarding global banking failures and the relevant conclusions made by the researcher.
- Full Text:
- Date Issued: 2012
- Authors: Fick, William
- Date: 2012
- Subjects: Banks and banking -- Risk management , Risk management , Asset-liability management
- Language: English
- Type: Thesis , Masters , MTech
- Identifier: vital:9288 , http://hdl.handle.net/10948/d1009429 , Banks and banking -- Risk management , Risk management , Asset-liability management
- Description: Businesses are continuously exposed to a changing business environment which may either exert positive or negative influences on profitability. The banking industry, in particular, is highly competitive and bank failures can have significant consequences for customers. Commercial banks, therefore, have a responsibility to protect their customers by implementing sound risk management strategies. In light of the recent financial crises (since 2007), risk management has once again become a popular topic of discussion since adequate risk management should have prevented or minimised the impact of the risks faced by failed banks. The primary objective of this study was to develop a framework that could be used by South African commercial banks to investigate risk management. Qualitative research was conducted in this regard. From this, findings and recommendations were derived in order to provide banks with a tool by which they could assess their exposure to risk. Various journals, websites, newspapers, bank reports and textbooks were consulted in support of the literature. The literature provided background information on the history and development of the risk management process. Considerable attention was given to the categories of risk that an adequate risk management framework should address. Furthermore, the current models used to manage risk in commercial bank were provided, as well as the specific reasons for bank failures. The main findings of this study were the identification of the most significant reasons for banking failures. These were identified as capital inadequacy, credit risk due to non-performing loans and a lack of banking supervision. In addition to these reasons, several other contributing principles were identified as important factors to be included in a risk management framework. A risk management framework was thus constructed in Table 5.1 based on the literature regarding global banking failures and the relevant conclusions made by the researcher.
- Full Text:
- Date Issued: 2012
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