New Head of FDIC Plans to Review Financial Health Rating System - ABI

The newly appointed head of the Federal Deposit Insurance Corp. (FDIC) said yesterday that said she plans to review the decades-old system for measuring lenders’ financial health, which banks say is outdated, Reuters reported. Jelena McWilliams, who became FDIC chair this month, said she wants the regulator to be more transparent about how it rates banks’ financial health using the so-called CAMELS rating system. CAMELS has not been modernized in more than 20 years, said McWilliams, a former banker who was appointed by President Donald Trump. The FDIC guarantees customer deposits in case a bank fails and has the power to seize banks that are judged to be on the verge of collapse. Like other bank regulators, the FDIC uses the CAMELS system to measure a bank’s overall financial condition. The system assesses capital adequacy, asset quality, management capability, earnings, liquidity and risk sensitivity. The Clearing House and other groups have complained that the system, as applied by the FDIC, is opaque because banks are not able to contest their rating. McWilliams said she soon intends to open the CAMELS system and other regulations to public comment so lenders and academics can advise whether the rules have shortcomings.

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