An Application of CAMELS and Z-Score Methodologies in a Comparative Analysis Between the Four Systemic Banks in Greece for the Period 2006-2016

Abstract

Τhe recent crisis which accelerated after the collapse of Lehman Brothers in 2008 revealed that relationships between the real economy and the financial sector are decisive for the stability of the world economy, even in in cases of well operating banking systems operating in competitive economies. In the present article, the authors focus on Greece, the weakest member of the Eurozone, but with a financial system which seemed to operate on a sound basis, avoiding initially the effects of the US financial crisis. The goal of this article is to examine the performance of the Greek banking sector for the critical decade before and after the crisis, assessing the financial position of the four systemic Greek banks for the period 2006-2016. For this purpose, two alternative methods, CAMELS and Z-scores, are applied, comparing the results obtained from the two methodologies. As expected, the results of both methodologies show that the failure risk during the crisis period 2011-2016 for the four systemic banks was significantly higher compared to the pre-crisis period 2006-2010.