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The CAMELS ratings or Camels rating is a US supervisory rating of the bank's overall condition used to classify the nation’s 8,500 banks. This rating is based on financial statements of the bank and on-site examination by regulators like the Fed, the OCC and FDIC. The scale is from 1 to 5 with 1 being strongest and 5 being weakest. These ratings are not released to the public but only to the top management of the banking company to prevent a bank run on a bank which has a bad CAMELS rating.[1]
It is being used by the United States government in response to the global financial crisis of 2008 to help it decide which banks to provide special help for and which to not as part of its capitalization program authorized by the Emergency Economic Stabilization Act of 2008.
Components
The components of a bank's condition that are assessed:[1]
- (C) Capital adequacy,
- (A) Asset quality,
- (M) Management,
- (E) Earnings,
- (L) Liquidity and
- (S) Sensitivity to market risk