Analysis Of The Impact Of The COVID-19 Pandemic On The Performance Of Participation And Deposit Banks Through CAMELS Components: Evidence From Türkiye

Abstract

This study examines the financial performance of participation (Islamic) banks and conventional deposit banks operating in Türkiye during the COVID‑19 era through the CAMELS framework (Capital adequacy, Asset quality, Management quality, Earnings, Liquidity, and Sensitivity to market risk). The pre‑pandemic period is defined as 2016–2019, while 2020–2022 represents the pandemic era, which also overlaps with heightened inflation and exchange‑rate volatility in Türkiye. For each CAMELS component, the analysis compares the period medians of the underlying financial ratios using the non‑parametric Wilcoxon signed‑rank test. The results do not indicate statistically significant period shifts at the 5% level across components. However, borderline p‑values (around 0.07–0.08) are observed for Earnings and Sensitivity, which should be interpreted cautiously given the limited number of underlying indicators per component. The paper links the findings to the sustainable finance/ESG discussion and offers policy implications regarding macro‑prudential buffers, liquidity management, FX‑risk governance, and sustainable funding instruments. This study contributes to the literature by (i) comparing participation and conventional banks’ CAMELS performance specifically across pre- and post-COVID periods in Türkiye, (ii) transparently defining the ratio set used for each component, and (iii) interpreting borderline findings in the context of Türkiye-specific inflation and exchange rate dynamics.