(Oct. 22, 2021) NASCUS President and CEO Lucy Ito congratulated the NCUA Board for finalizing an “S” component (for market sensitivity) to the CAMEL rating system (making it now “CAMELS”) at its Thursday meeting (and adjusting the “L” component, accordingly, for liquidity). She also thanked Board Member Hood for responding to NASCUS’ recommendation to introduce the change, which he did early this year – something NASCUS has advocated for years.
“To date, 25 states have implemented CAMELS and two additional states are scheduled to do so by Jan. 1,” Ito said. “Without exception, all states that have already adopted CAMELS report a very smooth and seamless transition for credit unions including smaller asset sizes as all credit unions are already monitoring market risk under the L component. Indeed, under CAMEL, credit unions can be ‘dinged’ unfairly. If their liquidity and sensitivity to market risk are rated differently, the lower rating will prevail for the L component. The addition of the ‘S’ component will not only be fairer, it will also position both credit unions and examiners to more effectively monitor and evaluate interest rate risk as the U.S. enters an uncertain interest rate environment.”