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What is the CAMELS rating system?

A:

Quick Answer

The CAMELS rating system is a supervisory rating system to classify the overall condition of a bank according to six factors. The acronym CAMELS represents the six factors of capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risk.

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What is the CAMELS rating system?
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Full Answer

The CAMELS rating systems helps supervisory authorities identify banks that are struggling in these areas. Using the rating system, banks are assigned a score on a scale of one, being the best, to five, being the worst, in each factor. Banks with an average score of less than two are considered to be high-quality institutions, while banks with an average greater than three are considered to be lower-quality and in need of attention.

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