FFIEC proposes first major CAMELS overhaul in 30 years

Posted by Erin Hall on May 21, 2026

The Federal Financial Institutions Examination Council (FFIEC) has proposed revisions to the CAMELS supervisory rating system that would place greater emphasis on material financial risk and aim to make ratings more transparent and predictable. Regulators are accepting public comments through Aug. 17, 2026.

CAMELS is used to assess the safety and soundness of banks and credit unions through a composite score and six component ratings: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Because those ratings can influence supervisory scrutiny, enforcement, and merger activity, even targeted changes to the framework carry broad implications for the industry.

What the proposal would do

The proposal would keep the basic CAMELS structure in place while revising the definitions and evaluation factors used for both component and composite ratings. The central goal is to tie ratings more closely to issues that materially affect an institution’s financial condition and risk profile.

A major focus is the management component. Regulators are proposing to remove the special weight that management has historically carried in the composite rating and to narrow the management evaluation factors so they are more closely tied to material financial risk.

Why the changes matter

Supporters of the overhaul say the current framework gives too much influence on subjective supervisory judgment, especially within the management component. Critics have long argued that institutions need clearer standards and better visibility into how composite ratings are determined.

Regulators, say CAMELS remains a core supervisory tool and that the revisions are intended to preserve that role while improving consistency and transparency.

Much of the debate centers on whether the management score has become too subjective and too influential. Industry voices have argued that when major supervisory outcomes depend on assessments that are not clearly tied to measurable financial risk, confidence in the ratings system suffers.

How regulators and industry groups are reacting

Bank trade groups broadly welcomed the proposal, particularly the effort to reduce the outsized role of the management component in composite ratings.

Under the proposal, the overall framework would remain intact, but regulators would revise both the composite and component definitions and remove the special consideration historically given to management when setting the composite rating.

The proposal would also narrow several management evaluation factors, trimming items that critics say can expand examiner discretion beyond the most material elements of risk management.

At the same time, regulators would preserve flexibility by allowing other evaluation factors to be considered in exceptional circumstances or as business practices evolve.

FDIC Chair Travis Hill described the proposal as an important step toward orienting supervision more closely around material financial risk, including by limiting the effect of specialty review findings to issues that pose meaningful financial risk.

Comptroller of the Currency Jonathan Gould supported the direction of the proposal but said it still does not go far enough in addressing potential “double counting” within the management component.

Gould argued that each CAMELS component should add distinct value to the overall assessment, rather than allowing the management score to reflect weaknesses that are already captured elsewhere in the framework.

In that view, no single component should exert disproportionate influence over the composite rating.

State regulators also urged balance. Charles Cooper, chair of the FFIEC’s State Liaison Committee, said the revised framework should continue to account for how institutions manage cyber, technology, legal, compliance, and operational risks alongside core financial risks.

What comes next

The proposal follows other recent efforts to revisit supervisory rating frameworks and reflects a broader push by regulators to make supervisory expectations more transparent and more closely tied to measurable financial risk.

Comments on the proposal are due by Aug. 17, 2026.

The result is a proposal that could meaningfully reshape how supervisors evaluate institutions, especially if the final version further limits subjectivity in the management rating.

Next steps

GoWest will collaborate with industry stakeholders to identify potential impacts of the proposal and welcomes feedback from members. For additional information or to share feedback, contact John Trull at [email protected] or Erin Hall at [email protected].

Posted in Advocacy on the Move, Regulatory Advocacy.