TeachMeFinance.com - explain CAMELS
CAMELS -- a rating system used by federal government examiners to evaluate the safety and soundness of a savings association or a bank. CAMELS is an acronym for the six elements that are evaluated: Capital, Assets, Management, Earnings, Liquidity and Sensitivity to risk. Each of these elements is rated on a scale of 1 to 5, and an overall CAMELS rating is assigned to the institution following an examination. A rating of 1 indicates the best performance, with 5 being the worst. OTS began using the CAMELS system for thrift institution examinations commenced after April 15, 1994. Previously, OTS had used the MACRO rating system. See MACRO.
MACRO -- a rating system formerly used by examiners to evaluate the safety and soundness of savings institutions. MACRO is an acronym for the five elements that were evaluated: Management, Asset quality, Capital adequacy, Risk management and Operating results. Based on the examiner's evaluation, each element was rated on a scale of 1 to 5, and the institution was assigned an overall MACRO rating of 1 to 5. Rating 1 indicated a strong performance, significantly higher than average. Rating 2 reflected satisfactory performance, which was average or above. Rating 3 reflected performance that was marginal and as such was considered below average. Rating 4 referred to performance that was significantly below average. If left unchecked, such performance might have evolved into weaknesses or conditions that could have threatened the viability of the institution. Rating 5 was considered unsatisfactory; performance that was critically deficient and in need of immediate remedial attention. Such performance, by itself or in combination with other weaknesses, impaired the viability of the institution. The MACRO rating system was used by federal thrift examiners from 1984 until August 15, 1994, when it was replaced by the CAMELS rating system. See CAMELS.
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