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March 2022 Monthly Bulletin

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The DFPI Office of Credit Unions will update the current CAMEL (Capital adequacy, Asset quality, Management, Earnings, and Liquidity) based rating system by integrating an “S” component to assess sensitivity to market risk and separate the “L” component to continue to address the evaluation of liquidity.  The change from a CAMEL to a CAMELS based rating format will take effect for examinations beginning on or after April 1, 2022.

The evaluation of Sensitivity will be rated on a scale of “1” to “5”, with “1” being highest, as is currently used for each component assignment of the CAMELS rating, and will be based on, but not limited to the following criteria:

  • Sensitivity of current and future earnings and economic value of capital to adverse changes in market prices and interest rates.
  • Ability to identify, measure, monitor and control exposure to market risk considering a credit union’s size, complexity, and risk profile.
  • Nature and complexity of interest rate risk exposure.

Current examination practices include a review of both the credit union’s interest rate risk and liquidity management policies, procedures, controls, reporting, management oversight, and risk mitigation strategies.  Therefore, we do not anticipate this change will materially impact current examination process.

The change by the DFPI Office of Credit Unions is designed to coincide with the concurrent change to the CAMELS rating system adopted by the National Credit Union Administration (NCUA) that becomes effective for federal credit union examinations starting on or after April 1, 2022.