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.
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