CAMELS
What does it mean
CAMELS is a regulatory framework used to assess bank risk. It stands for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk. Each section is graded individually, and the scores are combined to form a composite rating. Just like banks rate the relative risk of their loans, regulators use CAMELS to rate the overall risk of banks.
C - Capital Adequacy
A - Asset Quality
M - Management
E - Earnings
L - Liquidity
S - Sensitivity to Market Risk
Why does it matter
Bank regulators closely monitor and influence bank performance through rules and guidance. It's crucial for banks to grasp regulatory terminology to identify loans that meet criteria or defend those that don't.
Important points about CAMELS ratings:
- Ratings are confidential, not for public disclosure.
- The composite rating affects required FDIC Insurance payments on deposits.
- It also determines the frequency of bank examinations.
Other Relevant Terms
Want to Master Banking's Favorite Ratio?
The Debt Service Coverage Ratio (DSCR) is one of banking's favorite ratios. Want to ace it without breaking a sweat? No problem! We've got some simple, no-fuss pointers that will help you nail this ratio every time. You've got this!
Get the Cheatsheet NowNot Finding What You Are Looking For?
Let me know what terms, ratios or content you want to see covered.
Request Term or Ratio
Am I missing a key term or ratio? Let me know what you want to see covered.
Request Content
Do you have a topic idea you'd like to see covered? Send it my way.
Checkout Courses
Enhance your skills through a deeper understanding of your customers' businesses.
A bit about me
Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
