Question

What is the parameter of L CAMELS?

• A. Liability
• B. Leverage
• C. Liquidity
• D. Loans

Answer 1

Answer:

C. Liquidity

In the CAMELS / L-CAMELS rating system for banks, the “L” stands for Leverage, which measures the capital adequacy and financial strength of the institution. Other components of CAMELS include: C – Capital adequacy A – Asset quality M – Management quality E – Earnings L – Liquidity (in L-CAMELS, sometimes the first L is Leverage) S – Sensitivity to market risk