What does it mean when a bank has a CAMELS rating of 4?

Expert Solution

The word CAMELS stands for :

Capital adequacy
Assets
Management capability
Earnings
Liquidity
Sensitivity.

The ratings are assigned form 1 to 5 where 1 is the best ratings. So, on the basis of the ratings assigned , rating 4 projects poor performance which requires a serious supervision. Such ratings indicate that the banks are not obliging to the rules and regulations . The weaknesses and problems of the banks are not properly addressed by the members of the board of directors and the management collectively. There exists a high possibility of banking failure as well.

jeff jeffy answered 2 years ago

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