Camel Rating System Broadened to Include Risk Management

The Camel rating system will be expanded Jan. 1 to include how well a bank manages market risk, federal regulators announced Tuesday.

The change, proposed last July, follows a decision by regulators to disclose one overall score and five separate scores covering each component of Camel: capital adequacy, asset quality, management, earnings, and liquidity.

The new system will be known as Camels, with the "s" standing for "sensitivity to market risk." Examiners will evaluate how well prepared banks are to handle changes in interest rates, foreign exchange rates, and commodity or equity prices.

The updated rating system also revamps the description of each Camel component to reflect regulators' increased emphasis on risk management, the Federal Financial Institutions Examination Council announced.

These are the first major changes to Camel since the rating system was adopted in 1979.