Letter to Credit Unions 22-CU-05: CAMELS Rating System

Letter to Credit Unions 22-CU-05: CAMELS Rating System
March 2022

The effective date of the CAMELS final rule is April 1, 2022. Federally insured corporate and natural person credit unions will receive CAMELS component and composite ratings from the NCUA based on the new CAMELS rating system, beginning with examinations and supervision contacts started on or after April 1, 2022.

The updated CAMELS rating system includes a Sensitivity to Market Risk component rating that reflects the exposure of a credit union’s current and prospective earnings and economic capital arising from changes in market prices and interest rates. The Liquidity Risk component rating reflects a credit union’s ability to monitor and manage liquidity risk and the adequacy of liquidity levels.

The NCUA’s framework to support the uniform application of CAMELS includes annual supervisory priorities and examination scope updates, routine updates to the Examiner’s Guide and National Supervision Policy Manual, a standardized examination platform and training program, regional and national quality assurance and control programs, and periodic training that addresses the inter-relationships between and among risk categories and the CAMELS rating implications. Training will be made available to NCUA staff, state regulators that elect to use the CAMELS rating system, and credit union stakeholders.

NCUA has also created an online CAMELS rating system Q&A that addresses common questions related to Sensitivity to Market Risk and Liquidity Risk Supervision components.

NASCUS note:

NCUA’s implementation of CAMELS follows the 24 state credit union regulators that have already adopted and implemented CAMELS. The other federal banking agencies have been using CAMELS since the late 1990s.