CAMELS Rating System Changes Effective April 1

Changes to NCUA’s rating system change to CAMELS—from CAMEL—starting April 1. Credit unions with examinations beginning on or after April 1 will fall under the new system.

The acronym stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk.

Under the CAMELS rating system:

• The “S” component addresses sensitivity to market risk and interest rate risk (IRR) governance. It documents a credit union’s market sensitivity level and how the credit union measures, monitors, and manages market sensitivity. 
• The “L” component evaluation is modified to only consider available sources of funds and liquidity risk management It documents a credit union’s liquidity risk level and the credit union’s liquidity risk management program.

NCUA issued a Letter to Credit Unions (22-CU-05) recently with appendices including the updated CAMELS rating system and addressing common questions regarding the updated system.

Additional information can be found on CUNA’s CompBlog.