CAMELS gets its first rewrite since 1996

On May 19 the FFIEC proposed the first comprehensive revision of the Uniform Financial Institutions Rating System, the CAMELS framework, since December 1996 (FDIC FIL-23-2026 and 91 FR 29128). Adopted in 1979 and last updated three decades ago, the rating system behind every safety-and-soundness exam is finally on the operating table, and the comment window closes August 17.

The headline change is to the Management component. The proposal “would remove the sentence directing examiners to give ‘special consideration’ to the Management component in the composite rating,” and rewrites the component’s definition and evaluation factors. As Comptroller Jonathan Gould put it, the Management rating has historically “reflected deficiencies already captured in other components.” The proposal recasts it as a standalone assessment.

What the proposal actually changes

Beyond Management, the proposal changes the treatment of specialty-review findings, and revises the composite rating definitions. In the agencies’ words, it would also “emphasize consideration of material financial risks over concerns related to policies, procedures, and documentation.” That last sentence is the philosophical core. Ratings would be anchored to financial condition instead of how the paperwork looks.

Reputation risk exits the framework

The proposal also “would remove all references to reputation risk, consistent with the policies of the Board, OCC, FDIC, and NCUA.” It lands inside a larger campaign. An OCC/FDIC final rule prohibiting reputation-risk-based supervisory criticism took effect June 9 (91 FR 18279, responding to Executive Order 14331). On June 2 the FDIC, OCC, and Federal Reserve announced they had scrubbed reputation-risk references from 14 interagency guidance documents (FIL-27-2026).

The philosophical core of the rewrite is ratings anchored to material financial risk instead of paperwork. That is the part worth a comment letter.