What is a bank rating?

Bank rating is a number assigned to the bank that shows its financial security and strength. Government agencies evaluate banks to ensure solvency of financial institutions. The US has accepted the official system of bank analysis and evaluation based on various factors. These factors are capital, quality of assets, management, earnings, liquidity and sensitivity to risk (camels).

Since different methods and factors can be used to evaluate banks, a unified system was required. The US has allowed the Federal Council for Financial Institutions (FFIEC) to adopt uniform standards for the analysis and assessment of these institutions. FFIE selected the system based on camel factors. Various private and federal agencies use Rating Camels Bank to supervise American banks. FDIC is a government agency responsible for insurance and tracking US banks. FDIC requires banks to submit services regularly. This allows FDIC to evaluate information and make a banking evaluation. FDIC, however, does not publish banking evaluation for publicst.

Camels rating uses a numeric rating from one to five. The number one ranking reflects a positive rating and five indicates a negative evaluation. To illustrate, FDIC would assign a number of each of the factors in the camel for the bank. Then it would average the evaluation for each factor; The result is an overall banking evaluation. One or two assessment means no solvency problems, while the evaluation of three or more suggests that the bank has mild to serious problems.

FDIC does not constitute a banking evaluation only on the reports submitted by the bank. Performs visits on the spot and check out the books and verify the information. Examination banks can collect further information regarding loans and information about compliance with the regulations by banking regulations. The bank is also obliged to correct any problems that FDIC identifies.

In addition to FDIC with Office Compliter Currency (OCC)It relies on the camel's rating system to supervise American banks. OCC is empowered to enforce the laws regulating the National Bank. It also lays down regulations for the operation of national banks.

Because FDIC does not publish a banking evaluation, private banking evaluation companies have appeared. These companies have developed different formulas for rating banks. Various private companies that evaluate banks do not publish their methods of banking banks because the methods are proprietary.