Skip to main content
Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What is the CAMELS rating system?

Where am I?

In Safejob Community you can ask and answer questions and share your experience with others!

Sujai Adithya
Business Development and Banking & Financial Services Expert

CAMELS is a rating system developed in the US that is used by supervisory authorities to rate banks and other financial institutions. It applies to every bank in the U.S and is also used by various financial institutions outside the U.S. This rating system was adopted by National Credit Union Administration in 1987. In 1988, the Basel Committee on Banking Supervision of the Bank of International Settlements (BIS) proposed the CAMELS framework for assessing financial institutions.

The ratings are assigned based on the financial statements of the bank or financial institution. This system helps the supervisory authorities to identify banks that need maximum amount of regulatory concern. It is used to measure risk and financial stability of a bank. It determines the banks overall conditions in the areas of financial, managerial and operational aspects.

The rating system consists of a score from one to five with score one considered as best and score five considered as the worst for each factor. Banks which obtain the score of one are considered most stable, banks with a score of 2 or 3 are considered average and those with 4 or 5 considered as below average and are subjected to supervisory scrutiny.

Check out the factors for giving scores here4.

  • CAMELS is an international rating system used by regulatory banking authorities to rate financial institutions, according to the six factors represented by its acronym.
  • The CAMELS acronym stands for "Capital adequacy, Asset quality, Management, Earnings, Liquidity,
  • Banks that are given an average score of less than two are considered to be high-quality institutions. Banks with scores greater than three are considered to be less-than-satisfactory institutions. The acronym CAMELS stands for the following factors that examiners use to rate bank institutions:
  • Examiners also check if institutions comply with regulations pertaining to risk-based net worth requirements. To get a high capital adequacy rating, institutions must also comply with interest and dividend rules and practices. Other factors involved in rating and assessing an institution's capital adequacy are its growth plans, economic environment, ability to control risk, and loan and investment concentrations.