Notice of Proposed Rulemaking Regarding CAMELS Rating System

May 10, 2021

Melane Conyers-Ausbrooks
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

NASCUS Comments on Notice of Proposed Rulemaking Regarding CAMELS Rating System

Dear Secretary Conyers-Ausbrooks:

The National Association of State Credit Union Supervisors (NASCUS)[1] submits this letter in response to the National Credit Union Administration’s (NCUA) request for comments on RIN 3133-AF32, Proposed Rulemaking Regarding CAMELS Rating System.[2] If finalized, the proposal would add the ‘‘S’’ (Sensitivity to Market Risk) component to NCUA’s existing CAMEL rating system and redefine the ‘‘L’’ (Liquidity Risk) component to more precisely measure interest rate risk and liquidity risk.[3] NASCUS has long urged NCUA to adopt the CAMELS rating system and we fully support the proposal to do so.

We encourage NCUA to move expeditiously to implement the CAMELS Rating System.

In addition to more precisely measuring risk, adopting a Sensitivity to Market Risk rating would better align NCUA with the agency’s sister federal banking agencies (FBAs) and the many state regulators that have already implemented the CAMELS rating system. This change would also satisfy recommendations made by NCUA’s Inspector General in a 2015 Audit Report reviewing the agency’s Interest Rate Risk Program.[4] NCUA specifically seeks input on the proposed definitions and components of the criteria to be used in assigning the “S” and “L” ratings. There is no need to reinvent the wheel and develop a credit union CAMELS Rating System that diverges from the established CAMELS system currently in use in bank supervision and in the states that have adopted CAMELS for credit union supervision. NASCUS supports implementing the CAMELS Rating System as proposed and incorporating the definitions, components, and criteria from The Uniform Financial Institutions Rating System (UFIRS).[5]

As noted above, the FBAs and state bank regulators have utilized the CAMELS rating system since 1997 when the Federal Financial Institution Examination Council (FFIEC) adopted revisions to the UFIRS. To date, twenty-four state regulators have adopted the CAMELS Rating System for use in their credit union supervision programs.[6] Furthermore, there were another half dozen states considering adopting CAMELS prior to the publication of this proposal. Without question, the prevailing supervisory consensus is that distinguishing between the management of funds and the sensitivity to interest rate risk is a more precise and transparent method for evaluating risk. Furthermore, it is our understanding that the implementation of the CAMELS Rating System in the states where it was adopted was achieved with very little disruption to the affected credit unions and is in fact preferred by many of those same credit unions.

As acknowledged in the proposal, adopting the CAMELS Rating System will require NCUA to make corresponding changes throughout the agency’s Rules & Regulations and within various agency systems and documents. NCUA will also have to train examiners on the new system’s criteria and re-evaluate and reissue active guidance. These changes come with a cost.[7] However, the benefits of measuring a credit union’s condition more precisely as well as NCUA’s aligning with its federal and state peers in adopting CAMELS far outweigh any costs.

Thank you for the opportunity to provide our thoughts on the proposed changes to CAMELS Rating System. Adopting this change would enhance clarity and transparency related to interest rate risk exposure; increase the accuracy of the Liquidity and Sensitivity to Market Risk ratings; provide consistency with the other FBAs and state agencies that have adopted CAMELS, and better position NCUA to recognize interest rate risk and liquidity risk as the nation emerges from the pandemic’s economic dislocation. We are happy to discuss our comments further at your convenience.


Brian Knight, Executive Vice President & General Counsel


[1] NASCUS is the professional association of the nation’s 45 state credit union regulatory agencies that charter and supervise over 2,000 state credit unions. NASCUS membership includes state regulatory agencies, state chartered and federally chartered credit unions, and other important stakeholders in the state system. State chartered credit unions hold over half of the $1.87 trillion assets in the credit union system and are proud to represent nearly half of the 125 million credit union members.

[2] “CAMELS Rating System” 86 Fed. Reg. 13494 (March 9, 2021).

[3] Id. at 13495.

[4] “Review of NCUA’s Interest Rate Risk Program,” Report OIG-15-11, NCUA Office of the Inspector General (November 13, 2015). Available at

[5] 86 Fed. Reg. 13495 (March 9, 2021).

[6] Alaska, Arizona, Colorado, Connecticut, Georgia, Idaho, Iowa, Louisiana, Maine, Massachusetts, Michigan, Mississippi, Maryland, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Texas, Utah, Vermont, Virginia, Washington State, Wisconsin.

[7] NCUA in the past estimated those costs as less than $500,000.00. “Review of NCUA’s Interest Rate Risk Program,” Report OIG-15-11 (November 13, 2015) p. 12.