Goodbye Camel, hello Carmel.
Or how about Camelo?
The 18-year-old interagency rating system for banks, which scores them on capital, asset quality, management, earnings, and liquidity, is about to be changed to focus more on measuring and managing risk.
The existing five building blocks of the rating will remain, but they are likely to be joined by a sixth.
Hence, the need for a new acronym. The "r" in "Carmel" would stand for risk management. The "o" in "Camelo" would be "other risks." And Robert Miailovich, associate director of supervision at the Federal Deposit Insurance Corp., said "Cammel" also was discussed somewhere along the line, although he can't remember what it stood for.
"We are not spending serious time working on the acronym," said Mr. Miailovich. "We joke about it over cocktails. If it comes out 'XWZK,' that's fine too. At this point I don't know what letter we're going to use for the sixth component."
A group of staff members from the FDIC, Federal Reserve Board, Office of the Comptroller of the Currency, and Office of Thrift Supervision has been working on the new rating system for two years and recently completed a an outline of its plans.
Mr. Miailovich said the plan should be ready to show to agency chiefs within the next couple of weeks.
John Price, assistant director for supervisory policy at the OTS, agreed that a plan is in the works, but said he's making no guesses about when the new rating system will be unveiled.
Neither Mr. Miailovich nor Mr. Price would discuss the details of the new system. But it's clear the intention is to follow the path the Comptroller's Office and Federal Reserve have already taken, making bank risk management systems a bedrock of exams.
"I don't think they're talking about replacing Camel; they're talking about supplementing Camel with these risk factors," said James Watt, president and chief executive of the Conference of State Bank Supervisors. "I don't see it as a huge change."
State bank regulators also use Camel, which was developed by the three federal banking agencies in 1978 after the General Accounting Office criticized them for inconsistency. The OTS, which for years had its own rating scale - "Macro," for management, asset quality, capital adequacy, risk management, and operating results - got on the Camel bandwagon in 1994.
The ratings have become more important in recent years, as the FDIC has used them to help set risk-based premiums, and all the agencies have added regulatory perks for high-rated banks.
It therefore only makes sense for regulators to make risk management an explicit part of the rating equation, said Allen W. Sanborn, president and chief executive of Robert Morris Associates, the lending officers trade group.
"We clearly believe banks' business is shifting from loans to the management of risk," he said.