Why CAMEL failed to recognize the weakness of banks?

Many analysts or bank inspectors use the CAMEL for analyzing banks and not knowing the disadvantages of the model. Here is an expose of the potential loopholes and where the EAGLES benchmark may excel.

Demise of CAMEL?

In the CAMEL, analysts assess five key aspects of the operations of a financial institution – Capital, Assets, Management, Earnings and Liquidity – rating them on a scale of 1 to 5. An overall rating of 1 is best while a rating of 5 implies a bank being laden with existing or potential problems.

However, the CAMEL approach suffers from indeterminacy, subjectivity and even inconsistency. As most bank analysts and examiners will acknowledge, there are instances when an examination of the accounting records cannot decide whether to give an average or below average score. The ‘good’ and ‘bad’ indicators are easy to spot, but not so the ‘in-betweens’. This is a problem of indeterminacy. But when bank inspectors are forced to make a judgement, then it leads to the second problem of subjectivity. And where human minds are at work, they come with differing levels of expectations and perspectives.

So in is of little wonder why CAMEL has failed to recognize weaknesses in banks before the crisis.

Enter the EAGLES

The EAGLES is able to measure and compare banks performance in a more determinate, objective and consistent manner. The name is derived from the key success factors confronting banks today, i.e. Earning ability, Asset quality, Growth, Liquidity, Equity and Strategy. This approach has been pioneered by the writer and has gained creditability among the banking community and fund management industry in Asia, for competitor analysis and investment planning respectively. It also predicted the Asian financial crisis in the 1980s when the writer was “banned” from data collection in many countries.

Earning ability is shown by three noteworthy indicators – Return on Assets (ROA), Return on Shareholders’ Fund (ROSF) and Income/Overheads ratio (IOR). The importance of the IOR is usually not well understood. The main point lies in that Income depends on external market forces, while Overheads is highly influenced by internal staffing. So the bank must know how to adjust the staffing according to market demand for its products and services.

Asset quality is best assessed by on-site inspection of the bank’s loan portfolio.If this is not possible, the asset quality can be measured by the level of bad debt provisions, that is, bad and doubtful debts (BDD) as a percentage of total loans. A conservative approach will dictate that the quantum of provision to err on the high side rather low.

Growth rates of loans and core deposits are the most important indicators of a how a bank wants to position itself in the marketplace. A high growth loan book without a corresponding growth in deposit base signifies an intention to increase interest margins. A higher deposit growth without a corresponding growth in loans means that the bank suffers from low interest margins. For some banks lower interest margins could hamper overall profitability.

Liquidity can be described as the ability of a bank to have sufficient funds to meet cash demands for loans deposit withdrawals and operating expenses. For this reason, a balance should be found between the amount of deposits garnered and the quantum of loans extended. The indicator is the deposit-to-loan ratio.

Equity level and capital adequacy have profound impact upon the bank. Not only is there an international guideline (Basle II) that stipulates a bank must have a minimum capital equivalent to 8% of risk adjusted asset. Many banks are restricted to open additional branches unless they meet minimum capital requirements.

The effective management of a bank strategy is indicated by the strategic response quotient (SRQ). It is an intriguing ratio because it assesses management’s ability to lend, to garner deposits, obtain fee-based income and to manage the operating cost. As to what is an appropriate balance of the three core banking activities will depend on the bank’s strategy. The SRQ is obtained by dividing the interest margin by net operating cost (that is, total operating cost less fee income). The higher figure the better combined with excellent risk controls.

(Excerpt from “Soar on wings of Eagles” Bankers Journal Malaysia, Oct/Nov


You have help me,given me teory about models analysis EAGLES?

how if models EAGLES with stock exchange?

Pramita, kindly let us know where you are studying and for which course is this article relevant. I can send you the EAGLES application that was published by the Stock Exchange Journal of Singapore

Thank you before John..

Im student in State Univercity of Malang,Indonesia..
Im in 6th grade and now i take scription about relationship performance financial models EAGLES to return and volume stock trading activity banking in Indonesia..

So,i want relevant article..
Because in Indonesia very minus article about EAGLES..

Please provide me an email address that I could send EAGLES article to you.

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Thank you before John..

my email : jeshyta@yahoo.com

Could you send to me journal EAGLES for reverence my scription..

Dear Pramita
As I am the founder of EAGLES model, I have emailed to you 3 articles that proofed:
1. EAGLES concept;
2. Predictability of EAGLES on the Asian Financial Crisis (6 months before Thailand and Indonesia banks fell)
3. CAMEL model needs to be updated.

Dear John,
I am study in National Acedamy of Public Administration in Viet Nam. I want to do my thesis about camels model and EAGLES model in commercial bank. Could you give me some documents (as much as possible) about 2 models, especial EAGLES MODEL? Beacause I want something new in my thesis.
Thank you!
My email address: goldenbell2008@gmail.com

Thank you very much John..

I was take your article..

Responding to your questions on the EAGLES model.
Everything ratio you have written is correct except the SRQ.
The SRQ should read as follows:

  1. Interest revenue/Interest cost = the higher the better
  2. Non Interest Revenue/Non Interest Cost = the higher the better (ideally greater than 1)

Please remember: Having a NIR/NIC ratio greater than 1, means that the bank is not “forced” to lend to get profits. Forced lending is likely to increase the bank's non performing loans (ie bad debts).

hi John,

I am a postgrad student studying in the University of Nottingham, Malaysia Campus. My research topic is on the indicators of vulnerability in Asian Banks, and i believe these articles relating to EAGLES would help me alot.

I would be very much grateful if you could email the articles to me too.
My email address is chiamshuzhin@gmail.com

Thank You.

Hi Chris

I have written many articles on EAGLES and many of which were published by the Institute of Bankers Malaysia. You may pop by the Institute Library and get those articles in KL.

After reading them, should there be any specific you wish to know, I shall be most willing to send some more articles or clarify directly to you.


TOPIC: Northern Rock bank Collapse ! Was that a failure of audit in UK banking sector ?

I am MBA Finance student from University of Gloucestershire, UK. Doing research as dissertition, I need your help with regard to Topic. can you please send me some info and oblige


  1. My immediate answer is "NO".
    For a collapse of any financial institution, it requires more explanation than just failure of audit.
    By pinpointing to Audit as the major cause a failure of a fin institution seems too narrow as an explanation.
    We have seen many banks in developing world that has weak audit standards, but the banks are still thriving. And we have seen banks in the developed world. with very strict audit standards, and the banks have lost their capital.
  2. Collapse of fin institutions through the history, and you can traced back to 1800s, are mainly due:

a) Greed of the top management
Lending too much too quickly leading to significant credit defaults.
The internal polices and internal controls are not able to response to the need to pullback the lending. (check Thai Farmers Bank the year before the Asian fin crisis, where they rein-in the lending while others were pushing ahead).

This could be a leadership issue as well, not just weakness in internal processes.

Too many fin institutions depend on interest income and speculative income to generate revenues

Giving big bonuses for unsustainable growth in earnings is a problem. Because it encourages the CEO to take too much risks.

In sum, credit defaults is the No.1 problem in the history of banking.

b) Weak Reporting Systems
Many fin institutions do not have proper reporting systems. To the extent they they do not know that they are over-extended or adopting the wrong pricing

c) Weak Control systems
Many banks do not have effective operational policies and regulations.
I can name a very top bank, but I wont, that did not have internal work regulations until about 10 years ago. A professional colleague of mine was hired to lead a team to write all the standard ops manuals

d) Management capacity
The expansion of banking has led many newly minted bankers who are overly aggressive but lack the experience. There is not enough time for training bankers. Most banks try to be too stingy on training.

e) Check the Banking Product
Some products requires meticulous management of the funding.
For eg: Housing loans entail long term repayment. But if the fin inst is only has short term funds, then there is a mismatch: it is dangerous to lend long using short term funds. What measures has the the fin inst taken to correct this funding mismatch?

e) Finally, my advice is that you need to compare the financial indicators of Northern Rock with the likes of HSBC, using the EAGLES indicators and approach, and then you try spot the difference.

hey john

Thanks for sharing valuable information. I am doing dessertation on banks performance through camel approach...So i need your help to analyse it. Could you please forward me the realted articles..my id : pranesh_khale@yahoo.com.

waiting for your reply


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Dear Mr John

I am very interested in Eagles model. As your description, i spend time to search for the application but I can not find out.

I am study in University of Economics (Vietnam). I want to do a thesis "to make a comparision in Vietnamese commercial banks based on their financial performance". If you have some available (EAGLES) articles, would you please send to help me because CAMEL is old. I want something new in my research.

Please kindly help me, thank you very much.

My email address: nhanhuu2001@yahoo.com
Thanks and best regards.

Nhan (Mr)

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Good Day.
I am currently working on a paper about rankings of commercial banks within our locality based on their performances. I have seen that EAGLES is a promising approach and would be very applicable with my study.
Can you send me some relevant articles about the topic? It would be highly appreciated.
Thank you and God Bless.

Arnie, please let me have you email address and I shall send some EAGLES articles to you.

thanks.. can I have articles about EAGLES approach?? thanks.. here is my email address, fayedaquis@yahoo.com

thank you very much. ^_^

Hi Jon,

I am studying in Robert Gordon University
My topic is Measuring banks performances by using CAMELS Analysis (UK vs Indian banks)

If you can help me with the different articles that would be grateful.

I am bit tensed with my literature review part. If you can give me few articles will be highly obliged.

Thanks for your help in advance.

God bless u.


Hi Nicky, please send your email address to john@leadershipcorp.com, so that I can email you the article...........John

Hey John,

I stumbled across this article while doing some research on the CAMELS approach.
Although I have never heard about the EAGLES approach, it seems to be very promising.
Can you email me some articles so I can learn more about it?

Thank you in advance,


Angela, please let me have you email address and I shall send the EAGLES articles to you.


My email is anlin1607@yahoo.com.
Thank you in advance,


I have email you 2 articles.
If not received, please contact me again.

hello John
its very nice to know the another approach to judge the efficiency of banks. I am doing research on CAMEL approach and surely would like to know about EAGLES approach. kindly do let me know about the detail mechanism of the same. I will be happy to see your mail in my inbox regarding EAGLES approach.


Hi Krish, what is your email address? I can send you some articles on EAGLES approach.

You have help me,given me teory about models analysis EAGLES?
how if models EAGLES with banking performance?
Im student in State Univercity of Malang,Indonesia.
Im in 6th grade and now i take scription about banking performance analysis models EAGLES in Indonesia..

So,i want relevant journal..please..
Because in Indonesia very minus journal about EAGLES..
Thank You Before John..

Dear John,,
i am puu..please help me, give me journal about banking performance analysis with EAGLES..
my email mardlatila_sani@yahoo.co.id
Thank You Before john.

Hi, if you are seeking for articles, reference to your research area, or making inquiries, kindly go through CONTACT US, and provide us your email address. Otherwise we can't reach you. Thanks, John

Hi KK, please provide us your email address so that we can send you the EAGLES article.

Hi Jon

Could you send me EAGLES articles?
Thank you in advance

Hi John,

currently I m doing research about two banks in Malaysia,
can I have CAMELS and EAGLES approach? I have read above the information about two analyzing methods, I think that methods what i need. i would really appreciate your help, here is my email: alisher.ibs@gmail.com

Hi Ali, 2 key articles on EAGLES have been emailed to you. Please check and confirm. In case you have further questions please do not hesistate to drop us an email.

Victor, your email address is needed for us to send the articles.

Hi John,

I am working as a banking sector analyst (new to the role) and I focus on African banks.I was looking at ways to improve the output of my model when I came across the EAGLES approach.Please send me the detailed and relevant articles.Please suggest the right ranges (for 1-5) for each of these parameters that u considered.

Thanks in advance'

Sangeeta, I would like to send you some articles. Please provide your email address to john@leadershipcorp.com. Thanks.

Hi John,

Same as Sangeeta, I'm working on banking sector also as market analyst on Indonesian banks. Currently I'm need comparison of methodology of CAMELS and EAGLES, therefore need your assistance to send me some articles regarding EAGLES to carina_melani@yahoo.com.

Thanks a lot for the help.

Dear Mr. John

Could you send me EAGLES journal regarding bank performance?

my email address : shakila_luz@yahoo.com

thank you.


I am interested to know more about camel and eagle approach.

I have tried to find more articles but failed. Thus, can you send me some articles about camel and eagle? My e-mail address is yunwen_11@hotmail.com.



TO: Wie
FROM: Dr John Vong

Please confirm that you have received my articles.find the articles attached.

Dear Dr.John

My name is Watit working for Kasikornbank Thailand

May I request for your article relate to EAGLES ?

My email is wkkbank@gmail.com

Thank you very much

Dear John,

Your study on EAGLES concept sounds very interesting but I'm unable to find any articles that being published online.

Thus, it is highly appreciated if you could email me the articles on EAGLES that explained on:

  1. EAGLES concept;
  2. Predictability of EAGLES on the Asian Financial Crisis
  3. CAMEL model needs to be updated.

Other articles regarding EAGLES that been written by you are also welcome.

Looking forward for your reply. Thank you.

Email: aqilah_nms@yahoo.co.uk

Dear Professor John,
Thank you for your lectures at Shinhan Vietnam Bank. Because of some problems, I couldn't attend two last lessons. I hope I would have another chance in the future.
This morning, when I checked my notebook, I saw your website and read some articles of Camels and Eagles.
It's interesting that I'm using CAMELS to analize the performance and its effectiveness of joint venture banks (Shinhanvina bank, Indovina bank...) in Vietnam for my final thesis at HCMC National University.
I think Eagle is the new point and it will be much useful for my thesis. I have just had a short time for the deadline.
Would you mind sending me information about Eagle, some indicators need to update Camel model and predictability of EAGLES on the Asian Financial Crisis (6 months before Thailand and Indonesia banks fell).etc...
I would be grateful if you could send me via my email: samelinh@gmail.com
I'm looking forward to hearing from you.
Thank you very much in advance.


It is interesting, can you send me a copy of that article, it could be helpful for me for my thesis.
Thank you in advance

My email is rabinkmali@gmail.com

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can you please send me the EAGLES model? my email id is mandheerarora@gmail.com

thanks in advance.

Touche. Sound arguments. Keep up the good effort.

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