What is a CAMELS rating?

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The CAMELS rating is a score from 1 (best) to 5 (worst) that assesses the overall condition of a bank or credit union. It is an acronym for the top six key indicators of a healthy financial institution:

  • Capital adequacy: How well capitalized is the bank?
  • Asset quality: How risky is the asset portfolio?
  • Management: How capable is the bank’s leadership?
  • Earnings: Is the bank generating healthy returns?
  • Liquidity: How well managed is the balance sheet?
  • Sensitivity: Degree of exposure to market/interest rate shifts?

The “S” was added in 1995 as a way to provide additional oversight of loan assets that would be particularly susceptible to changes in interest rates (e.g., construction loans) or shifts in commodity prices (e.g., agricultural loans).

The score is assessed annually, with each letter scored individually, and then combined into an overall score.

Each bank’s rating is kept private, and is only shared with top level management. This is to prevent runs on the bank should they be “downgraded” from one year to the next. (Yikes!)

The only place to find a CAMELS estimate on the internet is on Stackfolio.com. Each bank’s scorecard has an estimate of the CAMELS rating, and is updated each quarter.

Stackfolio Camels Estimate

A quarterly snapshot of the CAMELS estimate gives bankers a way to track progress throughout the year, and course-correct if need be. Plus it’s fun to peek into your competitor’s scorecard to see how well they’re performing!

What do you think? Is the CAMELS estimate valuable to your organization?