Question #5
Reading: Reading 11 Analysis of Financial Institutions
PDF File: Reading 11 Analysis of Financial Institutions.pdf
Page: 2
Status: Incorrect
Correct Answer: A
Your Answer: A
Question
John Gittens is reviewing his firm's guidance for the application of the CAMELS framework and notices the following two statements: Statement 1: "The mission of a banking entity will affect the way its assets and liabilities are managed, and hence this qualitative impact is usually addressed within the management capabilities section of the CAMELS approach." Statement 2: "The corporate culture may lead to excessive risk taking, or even a high level of risk aversion, and this aspect is not covered in a typical CAMELS analysis." Regarding the two statements made by Gittens, statement 1 is most likely:
Answer Choices:
A. correct and statement 2 is most likely correct
B. incorrect, and statement 2 is most likely correct
C. incorrect and statement 2 is most likely incorrect
Explanation
Neither the mission nor the corporate culture are addressed in a typical CAMELS analysis,
hence statement 1 is incorrect (stating that the mission is included) but statement 2 is
correct (in stating that the corporate culture is not included).