The role of banking sector is becoming crucial in the economic development of any nation and it is becoming pertinent to ensure the reliability and robustness of this crucial pillar of the economy. This study aims to investigate empirically the effect of all the elements of CAMELS model on bank efficiency ratio for all the six listed banks on Muscat Securities Market within its banking sector for the period 2008-2014. This study explores the effect of CAMELS model’s six elements consisting of capital adequacy, assets quality, management quality, earnings, liquidity and sensitivity to risk on the bank efficiency. The results of descriptive statistics analysis indicated that most banks are competing to achieve the best assessment of the elements within the CAMELS model. The regression analysis shows that capital adequacy, asset quality, management quality and earnings variables of CAMELS model have significant effect on bank efficiency ratio at 1% and 5% significant level. But the liquidity and sensitivity to risk variables has low significant effect on bank efficiency ratio at 10% significance level. The researchers recommended that banks of Oman must focus on elements like capital adequacy and management quality and continually strive to improve performance by increasing cooperation with international banks, open foreign branches to ensure global presences and this will in turn reflect positively on the profitability of banks.

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