CAMELS Rating System

AAA

DEFINITION of 'CAMELS Rating System'

An international bank-rating system where bank supervisory authorities rate institutions according to six factors.

The six factors are represented by the acronym "CAMELS."

INVESTOPEDIA EXPLAINS 'CAMELS Rating System'

The six factors examined are as follows:

C - Capital adequacy
A - Asset quality
M - Management quality
E - Earnings
L - Liquidity
S - Sensitivity to Market Risk

Bank supervisory authorities assign each bank a score on a scale of one (best) to five (worst) for each factor. If a bank has an average score less than two it is considered to be a high-quality institution, while banks with scores greater than three are considered to be less-than-satisfactory establishments. The system helps the supervisory authority identify banks that are in need of attention.

RELATED TERMS
  1. Bank Examination

    An evaluation of the safety and soundness of a bank. The primary ...
  2. Bank Rating

    Ratings provided to the public by the Federal Deposit Insurance ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. Liquidity

    1. The degree to which an asset or security can be bought or ...
  5. Market Risk

    The possibility for an investor to experience losses due to factors ...
  6. Quality Of Earnings

    The amount of earnings attributable to higher sales or lower ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. What Are Central Banks?
    Personal Finance

    What Are Central Banks?

  3. How do leverage ratios help to regulate ...
    Economics

    How do leverage ratios help to regulate ...

  4. What methods can the government use ...
    Bonds & Fixed Income

    What methods can the government use ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center