Looking for more information, agencies extend comment on CAMELS rating system

A request for information (RFI) has been extended on regulators’ use of the CAMELS rating system – which the regulators use to determine the relative health and management competence of a financial institution – until Feb. 28, the agencies said Friday.

The Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve said that they had extended the deadline “to allow interested persons more time to analyze the issues and prepare their comments.” The original deadline was set for Dec. 30.

In October, the two banking regulators issued the RFI, seeking comments on their use of the “Uniform Financial Institutions Rating System,” also known as the CAMELS rating system. (CAMELS stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity – the primary elements reviewed in a financial institution examination.)

The FDIC and the Fed said then that their comment call was “in keeping with ongoing initiatives to increase transparency and improve efficiency” at the agencies. They also asserted that their outreach on CAMELS ratings “is consistent with their commitment to provide opportunities for public feedback on issues affecting supervised institutions.”

Among other things, the agencies are seeking comment (now due Feb. 28) about:

  • To what extent do the agencies appropriately communicate and support each rating after an on-site examination or at the end of an examination cycle, including communicating the effect of each rating or finding on the composite rating?
  • Does the agencies’ use of the CAMELS rating system vary from one examination, or examination cycle, to the next?
  • To what extent do the agencies apply the CAMELS rating system in a manner that is sufficiently flexible to reflect differences between financial institutions such as size, business models, risks, and internal and external operating environments, as well as overall technological developments and emerging risks?
  • What steps, if any, should the agencies take to promote the consistent application of the CAMELS framework in the supervisory process (as well as use of CAMELS ratings in applications and enforcement matters)?

Agencies extend deadline on request for information on CAMELS rating system