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. The Government And Risk: A Love-Hate ...
    Insurance

    The Government And Risk: A Love-Hate ...

  4. Changes In Tax Legislation And Regulation
    Taxes

    Changes In Tax Legislation And Regulation

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center