CAEL RATING:A Stress Test in Bank Monitoring

• Main Author: Perpustakaan UGM, i-lib
• Format: Article NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2002
• Subjects: Jurnal i-lib UGM
• Online Access: https://repository.ugm.ac.id/25469/; http://i-lib.ugm.ac.id/jurnal/download.php?dataId=8464
• Institution: Universitas Gadjah Mada

Stress test in banking system refers to the controlling and monitoring system of the central bank on each individual bank in order to ensure the safety and soundness of banks. As a whole, the main reason is to maintain the stability of banking system. Since the 1970s until today, several forms ofstress test have been introduced to evaluate the level ofbanks' soundness. The first method is known as CAEL Rating System. However, vast development in banking system today has placed many questions on reliability and effectiveness of this method. Therefore, the main purpose of this paper is to introduce the important of the changes in the said method parallel to recent development in banking system. This has resulted in the introduction of a new method called weighted CAEL� FIMS Risk Rank. This method will be used in this paper exclusively to evaluate a total number of 32 commercial banks in Malaysia in the periods of 1997 and 1998. The finding is expected to be used as a guidance to monitor the condition of banks more accurately and thoroughly after their unpleasant performances during the recent banking crisis. Keywords: bank monitoring: bank regulation: bank supervision