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The CAMEL framework is essential for assessing the health of financial institutions. It consists of five components: Capital Adequacy, which reflects a bank's stability; Asset Quality, focusing on lending decisions and credit risk; Management, which evaluates the bank's leadership in navigating regulations; Earnings, indicating financial performance over time and against industry peers; and Liquidity, the bank’s ability to meet withdrawal demands. Analyzing these elements helps ensure the resilience and regulation compliance of banks.
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