The Bank Policy Institute (BPI) submitted a comment letter to the Federal Reserve and Federal Deposit Insurance Corporation in response to their request for information seeking public input on a fundamental aspect of how the federal banking agencies supervise banks, the Uniform Financial Institution Rating System (UFIRS), commonly known as CAMELS. UFIRS was adopted in 1979, and though the regulatory framework for banks has fundamentally changed, CAMELS has changed very little.
“The purpose of CAMELS ratings has changed fundamentally; the consequences of poor CAMELS ratings have become significant, severe and legally binding; and a regulatory revolution has occurred in terms of establishing more objective and accurate ways to assess certain CAMELS components,” wrote BPI President and CEO Greg Baer in the letter. “There have been innumerable changes to how banks are regulated since the last revision to the UFIRS that make it outdated and substandard as a measure of financial condition.”
