A CAMELS-Based Framework for Banking Risk Mitigation: Evidence from Cameroon

Wissem Ajili Ben Youssef, Najla Bouebdallah and Abdoulaye Ramadan Nsangou

Chapter 12 in Innovating Finance for a Sustainable Future:Integrating FinTech, Blockchain and Generative AI, 2026, pp 361-388 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This study examines the determinants of bank failure risk in Cameroon’s banking sector, with particular focus on how bank-specific characteristics moderate the relationship between institutional size, capitalization requirements, and default probability. Using panel data from thirteen Cameroonian banks from 2000 to 2013, we employ multiple regression analysis with the Z-score as our primary measure of bank stability. Independent variables are constructed using the CAMEL framework indicators (Capital adequacy, Asset quality, Management efficiency, Earnings, and Liquidity) to capture comprehensive dimensions of bank performance. Results demonstrate that higher capitalization ratios significantly reduce default risk, with well-capitalized institutions exhibiting superior Z-scores. Counterintuitively, banks with larger loan portfolios demonstrate lower failure risk, suggesting effective credit risk management practices. However, institutions with substantial deposit bases tend to adopt riskier investment strategies, potentially compromising their stability. Bank size alone does not confer protective benefits against insolvency risk in the Cameroonian context. Findings suggest Cameroonian financial regulators should strengthen prudential requirements and capital adequacy standards to mitigate systemic banking risk. Banks may pursue growth strategies through expanded lending activities while maintaining robust capitalization, though deposit-driven expansion requires careful risk management oversight. This study provides the first comprehensive analysis of bank failure determinants in Cameroon, using CAMEL-based indicators, and contributes to the limited literature on banking stability in Sub-Saharan Africa, offering policy-relevant insights for emerging market financial regulation.

Keywords: Generative Artificial Intelligence; Technology–Organization–Environment (TOE); ESG Factors; Sustainability; Blockchain; Supply Chain Finance; Trade Finance; FinTech; Customer Loyalty; Mobile Banking; Perceived Risk; Trust; Personalization; Digital Banking Adoption; Customer Behavior; Digital Innovation; Retail Banking; CSR; Foreign Ownership; Digital Transformation; Bank Performance; Big Four; Auditing; Intention to Use; Risk Assessment; Risk Mitigation; CAMELS-Based Framework; Banking; Qualitative Approach; Quantitative Approach; Case Study; Vietnam Banking Sector (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 O33 Q56 (search for similar items in EconPapers)
Date: 2026
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