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Financial Management and Analysis of Projects :
6. Financial Institutions
6.4. Assessing FI Performance
6.4.1. Introduction
6.4.1.1.
A wide range of indicators is available for reporting by FIs. The
most important are described in this section. The ratios and indicators
that are described in other parts of these Guidelines are generally
not appropriate for assessing FI performance.
6.4.1.2. It is important that the
financial analyst (investment officer) only recommends indicators
that the FI fully understands and is willing to use in their day-to-day
management processes. However, where a FI is reluctant to prepare
and use indicators effectively, or does not have a financial management
system capable of preparing the indicators that ADB staff have recommended,
these issues should be recorded in an Aide Memoire and reported
to an MRM.
6.4.1.3. The most important criteria
for determining the appropriateness of an FI to act as a financial
intermediary are its solvency, profitability, and liquidity. In
this respect, since 1988, the Basle Committee on Banking Supervision
(BCBS) of the Bank of International Settlements (BIS) has recommended
using Capital adequacy, Assets
quality, Management quality, Earnings
and Liquidity (CAMEL) as criteria for assessing
an FI.
6.4.1.4. The following sections describe
the application of the CAMEL framework and provide a selection of
appropriate indicators. They also discuss risk management in relation
to FIs. A special section examines the application of these Guidelines
to microfinance institutions (MFIs).
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