It is important to note that the financial industry, in general, and the banking sector processes are regulated, and the banks maintain strong control over it. In this research, we have used the CAMEL model, a globally recognized framework to measure the overall performance of banks. In this study, we analyze whether the components of the CAMEL model which are Capital Adequacy, Asset Quality, Management Efficiency, Earnings Ability, and Liquidity Management have a positive or negative impact on bank performance. To conduct the research, we considered 10 major banks of Pakistan (Conventional & Islamic) and collected data from the period of 2015-2020. We analyzed different ratios in each component such as Capital Adequacy Ratio to measure Capital Adequacy, Non-Performing Loans to Gross Advances, and Non-Performing Loans to Equity ratios to measure Asset Quality. Similarly, ratios such as Return on Asset, Return on Equity, and Return on Capital Employed are used to measure Earnings Ability. For Management Efficiency and Liquidity Management ratios like Liquidity Coverage Ratio, Net Stable Funding Ratio, Quick Ratio, Cash Ratio, Cost to Income Ratio, and Gross Advances to Total Deposits ratio are used. The results showed that Non-Performing Loans to Equity and Non-Performing Loans to Gross Advances, Cost to Income Ratio, and Gross Advances to Total Deposits Ratio seem to have a negative impact on banks' performance, meaning a higher number will decrease the bank earnings. For ratios other than these, there has been a positive relationship established and it was concluded that those ratios positively impact the bank's performance meaning a higher number will increase the bank's earnings. Thus, overall, through this research, we concluded that the CAMEL model has a significant impact on bank performance. Through the CAMEL model, we can shorten the inspection time by focusing on the main six components and measuring the soundness of the banking sector. Also, through this research, we can imply that the banks must strictly follow the Basil guidelines with reference to certain elements including capital adequacy and liquidity. Also, by applying the CAMEL model to this research we can imply that banks need to have strict monitoring of their non-performing loans and should strive on improving their asset quality and should focus on improving their profitability margins
