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Bank Director training on CAMELS rating

What Credit Analysts need to know about CAMELS

I just read a great article entitled “The CAMELS Rating: How to Get Over the Hump” by Roger Shumway, executive vice president and chief credit officer at the Bank of Utah.

As a reader of my blog, you are likely a credit analyst, underwriter or someone with responsibility for credit risk readiness. So how much do you REALLY need to know about CAMELS?

The Front-line need to know

Isn’t CAMELS a management concern? Well, yes, and yours as well. The more the front-line lending and credit professionals understand about what management needs to do to keep the bank safe and sound, while profitable, the better able you are to go after the right deals, know when and how to stretch, and understand how your very next loan either makes the bank stronger, or weaker.

I recommend you read the article. Roger ends with this conclusion:

To summarize, management must do the following:

  1. Recognize asset quality will make or break the bank.
  2. Enforce the bank’s risk appetite.
  3. Avoid over-risking and underpricing.
  4. Manage concentrations.
  5. Leverage independent reviews.
  6. Stay true to proven standards.

Recognize that everything affects capital. Understand the importance of board oversight. Be aware that capital planning must reflect the bank’s risk profile. And heed the lessons from the financial crisis.

As I look at Roger’s list, most of those items are directly impacted by what the front-line lenders and credit professionals are doing every day.

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.