IDEAS home Printed from
   My bibliography  Save this paper

A CAMEL rating's shelf life


  • Cole, Rebel A.
  • Gunther, Jeffery W.


How quickly do the CAMEL ratings regulators assign to banks during on-site examinations become "stale"? One measure of the information content of CAMEL ratings is their ability to discriminate between banks that will fail and those that will survive. To assess the accuracy of CAMEL ratings in predicting failure, Rebel Cole and Jeffery Gunther use as a benchmark an offsite monitoring system based on publicly available accounting data. Their findings suggest that, if a bank has not been examined for more than two quarters, off-site monitoring systems usually provide a more accurate indication of survivability than its CAMEL rating. The lower predictive accuracy for CAMEL ratings “older” than two quarters causes the overall accuracy of CAMEL ratings to fall substantially below that of off-site monitoring systems. The higher predictive accuracy of off-site systems derives from both their timeliness—an updated off-site rating is available for every bank in every quarter—and the accuracy of the financial data on which they are based. Cole and Gunther conclude that off-site monitoring systems should continue to play a prominent role in the supervisory process, as a complement to on-site examinations.

Suggested Citation

  • Cole, Rebel A. & Gunther, Jeffery W., 1995. "A CAMEL rating's shelf life," MPRA Paper 24693, University Library of Munich, Germany, revised 01 Nov 2008.
  • Handle: RePEc:pra:mprapa:24693

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Allen Berger & Sally Davies, 1998. "The Information Content of Bank Examinations," Journal of Financial Services Research, Springer;Western Finance Association, vol. 14(2), pages 117-144, October.
    2. Rebel A. Cole & Jeffery W. Gunther, 1995. "FIMS: a new monitoring system for banking institutions," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-15.
    3. R. Alton Gilbert, 1993. "Implications of annual examinations for the Bank Insurance Fund," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 35-52.
    4. Allen N. Berger & Sally M. Davies, 1994. "The information content of bank examinations," Proceedings 55, Federal Reserve Bank of Chicago.
    5. Jones, David S. & King, Kathleen Kuester, 1995. "The implementation of prompt corrective action: An assessment," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 491-510, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Fuad Aleskerov & V. Belousova & M. Serdyuk & V. Solodkov, 2008. "Dynamic Analysis of the Behavioural Patterns of the Largest Commercial Banks in the Russian Federation," ICER Working Papers - Applied Mathematics Series 12-2008, ICER - International Centre for Economic Research.
    2. Richard S. Barr & Kory A. Killgo & Thomas F. Siems & Sheri Zimmel, 1999. "Evaluating the productive efficiency and performance of U.S. commercial banks," Financial Industry Studies Working Paper 99-3, Federal Reserve Bank of Dallas.

    More about this item


    bank; bank failure; CAMEL; CAMEL rating; commercial bank; offsite supervision;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:24693. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.