Abstract

The purpose of this article is to adopt the CAMELS model to the bank credit risk rating by using simple indicators from publicly available quantifiable information retrieval from their financial statements. Then, it is to test its empirical validation after completion of its revised methodology in 2012 as response to the sub-prime crisis using the rating ‘all-in’ of 128 banks rated by Moody’s of 29 EMENA countries. We use ‘ordered logit’ regression for the variable to explain the rating classes and the bootstrap resampling techniques to assess the stability degree of the best model selected with the information criteria’s AIC. Under this scheme, the explanatory powers measured by Pseudo R2 of the best model is 56.47%. The results show that the two components: intrinsic credit quality and the support of the environment measured respectively by CAMEL factors and the proposed ‘S’ factor determine well the ‘all-in’ ratings. The sovereign rating of the bank establishment country, the size and the ‘stand-alone’ rating of the bank are the most relevant variables.

This work is licensed under a Creative Commons Attribution 4.0 License.