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Investopedia explains 'Bank Examination'
In evaluating the safety and soundness of an institution, examiners follow the CAMELS system: Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity (to systemic risk). Banks are ranked on a scale of one to five in each category, and receive an overall assessment, with one being the strongest and five the weakest. Banks with CAMELS of four and five are ordinarily placed on a watch list and monitored closely.
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