Intentional Environment: (CAMELS Connections)

I get the privilege of traveling across the country every week calling on the great people in community banking. I have started to notice a direct correlation to the banks that have a trained staff welcoming customers when they walk in and their CAMEL ratings. CELS ratings or Camels rating is a supervisory rating system originally developed in the U.S. to classify a bank’s overall condition. It’s applied to every bank in the U.S. (approximately 7,000 institutions) and is also implemented outside the U.S. by various banking supervisory regulators.

The ratings are assigned based on a ratio analysis of the financial statements, combined with on-site examinations made by a designated supervisory regulator. In the U.S. these supervisory regulators include the Federal Reserve, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

Ratings are not released to the public but only to the top management to prevent a possible bank run on an institution which receives a CAMELS rating downgrade.[1] Institutions with deteriorating situations and declining CAMELS ratings are subject to ever increasing supervisory scrutiny. Failed institutions are eventually resolved via a formal resolution process designed to protect retail depositors.

The components of a bank’s condition that are assessed:

(C)apital adequacy


(M)anagement Capability


(L)iquidity (also called asset liability management)

(S)ensitivity (sensitivity to market risk, especially interest rate risk)

Ratings are given from 1 (best) to 5 (worst) in each of the above categories. While the general public doesn’t get to see these ratings, we design benefit plan bonuses around the performance of the bank and this is a good starting point for building a set of metrics to track. I have a large amount of windshield time to think and it dawned on me to investigate this correlation between lobby etiquette and CAMEL ratings. There seems to be a connection between service and performance. While this is by no means a scientific study, it does seem to verify that nice people, performing good service reward shareholders directly.

For more information on this idea, please contact a consultant at Executive Benefits Network.