Beyond 'CAMELS'

What does 'Beyond CAMELS' mean? CAMELS is an acronym that stands for:
 C - Capital Adequacy
 A - Asset Quality
 M - Management Risk
 E - Earnings Proficiency
 L - Liquidity Strength
 S - Sensitivity to Market Risk

VERIBANC has developed tests that addresses all of the above areas of banking risk. In addition to these areas we have identified two additional, somewhat subtle areas of risk: Opportunity Risk and Regulatory Risk.

Our quantitative analytics are the broadest, purest, and have stood the longest. No other bank rating firm provides you with this value.
-   We have never subscribed to peer analysis for our ratings. This methodology has an inherent deficiency. In bad economic times the top of the peer may look good when in fact they are not.
-   We guarantee No Conflict of Interest. Since 1981 we have never accepted click-through fees (no links on our website), or advertising fees from the banks that we rate. We make no bank recommendations and no bank has ever paid us to rate them.
-   We have always published our track record. So you can see our history not just a selected view of the good years.

C -   Capital Adequacy: does the bank have enough equity (or capital) to buttress any future or currently recognized problem assets. This is the back stop or safety cushion a bank maintains in the event of either a severe economic downturn or any other event, either in depth or length, that the bank has not planned for.
A -   Asset Quality: are the bank's assets (loans and securities) underwritten in a conservative or aggressive style. Conservative or aggressive can be measured by the amount of problem assets recorded, charged off, and the reserves set aside for estimated portfolio losses.
M -   Management Risk: what are the regulators, state or federal, reporting on management's capabilities, or lack of, in meeting the state and/or federal operational requirements.
E -   Earnings Proficiency: is the bank making money, losing money, or breaking even? To what degree is the bank making or losing money.
L -   Liquidity Strength: how much of the bank’s assets are tied up in long term (greater than a year) assets? Liquidity encompasses both the reach of problem loans as well as the ability to liquidate the securities portfolio.
S -   Sensitivity to Market Risk: Are long term investments enhancing income or are they a drag on it? Recognition of long term investment losses will negatively impact capital.

VERIBANC's model goes beyond 'CAMELS' *

Federal banking (not holding company) supervisors review six critical aspects (Capital adequacy, Asset quality, Management quality, Earnings performance, Liquidity risk, and Sensitivity to market risk) of a bank’s operation and condition in their examination rating procedure (the Uniform Interagency Bank Rating System), commonly called the CAMELS rating. The relationship between VERIBANC’s color and star risk ratings and the “estimated CAMELS” score for banks, not credit unions, is tabulated as follows:

Color & Star Ratings
Estimated CAMELS Score†
Green, Three Stars
with Blue Ribbon recognition
Green, Three Stars
without Blue Ribbon recognition
(not directly comparable)
Green, Two Stars
Yellow, Two Stars
(not directly comparable)
Green, One Star
Green, No Stars
Yellow, One Star
Yellow, No Stars
Red, No Stars

†PLEASE NOTE: Only the government and the institution itself, by law, have access to the “official CAMELS” ratings. Our studies (through 12/31/03)  have shown that our “estimated CAMELS” is close. Most other rating services and agencies consider only three, four or five of the six “CAMELS” factors. (Originally, there were only five CAMEL factors. The sixth one, “sensitivity to market risk,” was added by regulators several years ago.)

* VERIBANC takes all six into account plus we look at Regulatory Risk and Opportunity Risk.


From time to time VERIBANC has been asked to provide a grade equivalent rating scale for the various color code and star rating levels. Below please find one such mapping.

Annualized Failure
Rate per 10,000
banks per year
Only Blue Ribbons
1 in 40 years
Green with 3 Stars - not Blue Ribbon
1 in 10,000
Green with 2 Stars
3 in 10,000
Yellow with 2 Stars
7 in 10,000
Green with 1 Star
15 in 10,000
Yellow with 1 Star
70 in 10,000
Green with No Stars
200 in 10,000
Yellow with No Stars
524 in 10,000
Red with No Stars
3,948 in 10,000

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