Which of the following is true regarding CAMELS and the Basel Accords? CAMELS ar

Question

Which of the following is true regarding CAMELS and the Basel Accords?

CAMELS are a set of regulatory rules to evaluate the soundness, health, and riskiness of FIs.

The purpose of the Basel Accords create a set of enforceable regulations for FIs to reduces their various risk aspects.

CAMELS is a rating system to evaluate the condition of FIs, however academic literature has been inconclusive on its usefulness.

The Basel Accords is not continually updated to improve safety of FIs around the world.

None of the above.

Explanation / Answer

1. True: CAMELS rating system is regulatory in nature and supervisors use it to evaluate banks/FI's health, soundness and riskyness through various ratios.

All other statements are false as Basel accord in tiself is recommendatory in tature, based on which regulators can make regulations. CAMELS system has been proved effective and Basel norms are regulerly updated.

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