The financial soundness of the Palestinian banking sector: an empirical analysis using the CAMEL system

Abstract

The purpose of this article is to evaluate the financial soundness of commercial banks listed on the Palestine Exchange using the CAMEL rating system. A content analysis, composite rating, and a one sample t-test are applied to a sample of six local banks operating in Palestine. Secondary data were obtained from the financial statements of the banks for the period of 2007–2017 in order to conduct the research and evalu-ate their financial performance. The empirical test has shown that Palestinian banks adhere to the Basel Committee standards in terms of capital adequacy and that they display stability in terms of profitability and liquidity. However, the paper concludes that the operational efficiency of the banks being evaluated is “fairly managed”. Finally, the findings indicate significant differences amongst Palestinian banks in terms of per-formance, assessed using the CAMEL rating system. This paper suggests that the listed Palestinian banks should focus on long-term investments rather than short-term ones, and monitor their risk management practices to increase their profits and move to-wards sustainability and growth.