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News Release 1997-29
March 17, 1997
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WASHINGTON, D.C. — In response to questions from bankers and examiners about the December 1996 revisions to the Uniform Financial Institutions Rating System, commonly referred to as the CAMELS rating system, the Office of the Comptroller of the Currency (OCC) today issued two question and answer documents to its examiners and national banks.
The revised rating system, in effect since January 1, reflects major changes that include an increased emphasis on the quality of risk management practices and the addition of a new component on sensitivity to market risk — the "S" in CAMELS. The other components are capital adequacy, asset quality, management, earnings, and liquidity.
The first Q-and-A document, developed jointly by the OCC, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and Federal Reserve Board, primarily deals with the new market risk component and risk management issues. The second Q-and-A document, prepared by the OCC, deals with supervisory and examination issues faced by its examiners and some national banks. The purpose of both Q-and-A documents is to provide additional guidance and clarification for consistent and uniform implementation of the revised rating system.
The two Q-and-A documents make these major points:
The revised rating system should not have a significant effect on noncomplex community bank examinations. For these banks, there is no need to obtain additional information or perform additional examination procedures to determine component and composite ratings.
The two Q-and-A documents also address issues such as changing ratings between examinations, rating discussions during exit meetings with senior management, and other examination issues.
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