CAMELS Rating System

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CAMELS Rating System

A mnemonic device for the factors by which regulators determine banks' riskiness. The rating system goes on a scale from one to five, with one showing the least risk and five the most risk. The factors break down as follows:

C - Capital Adequacy
A - Quality of Assets
M - Quality of Management
E - Earnings
L - Liquidity
S - Sensitivity of the Bank to Market Risk
References in periodicals archive ?
The FDIC, the OCC and the Board of Governors of the Federal Reserve System began using the CAMELS rating system on Jan.
Not all of the appeals seeking a change in a CAMELS rating disclosed the rating the bank had received, but many did.
Ludwig pointed out, "Still in the US it is a criminal violation of law for anyone to disclose a CAMELS rating [assigned based on a ratio analysis of financial statements, combined with on-site examinations.
Ratings are deduced from a system commonly known as the CAMELS rating system.
Our criterion for strong performance is maintaining the highest supervisory rating, a composite CAMELS rating of 1, during the years 2006 through the end of 2011; we refer to this condition as "thriving" (See the boxed insert for a description of the CAMELS rating system.
Like the central bank of Bangladesh's CAMELS rating, the offsite supervision -- CARAMEL -- will rely on analyses upon seven indicators - capital sufficiency, asset quality, reinsurance, actuarial matters, administrative efficiency, earnings and profitability and liquidity -- to be assessed on a scale of one to six.
The CAMELS rating system assesses banks according to capital, assets, management, earnings, liquidity, and sensitivity to market risk.
The CAMELS rating -- a score of 1 being the highest and 5 being the lowest -- is used by the central bank to assess if the bank is in need of attention.
As part of the free service, financial institutions will be able to assess their system of internal controls based on the key areas of their CAMELS rating (Capital Adequacy, Asset Quality, Management and Internal Control, Liquidity, Market Sensitivity).
The components are then combined to create an overall CAMELS rating.
The federal banking and thrift institution regulatory agencies issued on February 28, 2005, an interagency advisory to remind financial institutions that they are prohibited by law from disclosing their CAMELS rating and other nonpublic supervisory information without permission from the appropriate federal banking agency.
Will's bank has an excellent CAMELS rating so he feels certain that the bank would meet the requirements for primary credit.