Request for Information on Application of the Uniform Financial Institutions Rating System, 58383-58386 [2019-23739]
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Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Notices
Unauthorized Committees (PACs and
Party Committees)
Political committees not filing
monthly in 2019 or 2020 are subject to
special election reporting if they make
previously undisclosed contributions or
expenditures in connection with the
Wisconsin Special Primary or Special
General Elections by the close of books
for the applicable report(s). (See charts
below for the closing date for each
report.)
Since disclosing financial activity
from two different calendar years on one
report would conflict with the calendar
year aggregation requirements stated in
the Commission’s disclosure rules,
unauthorized committees that trigger
the filing of the consolidated PreGeneral & Year-End Report will be
required to file this report on two
separate forms: One form to cover 2019
activity, labeled as the Year-End Report;
and the other form to cover only 2020
activity, labeled as the Pre-General
Report. Both forms must be filed by
January 15, 2020.
Committees filing monthly that make
contributions or expenditures in
connection with the Wisconsin Special
Primary or Special General Elections
will continue to file according to the
monthly reporting schedule.
Additional disclosure information in
connection with the Wisconsin Special
Elections may be found on the FEC
website at https://www.fec.gov/helpcandidates-and-committees/dates-anddeadlines/.
Disclosure of Lobbyist Bundling
Activity
Principal campaign committees, party
committees and leadership PACs that
are otherwise required to file reports in
connection with the special elections
58383
must simultaneously file FEC Form 3L
if they receive two or more bundled
contributions from lobbyists/registrants
or lobbyist/registrant PACs that
aggregate in excess of the lobbyist
bundling disclosure threshold during
the special election reporting periods.
(See charts below for closing date of
each period.) 11 CFR 104.22(a)(5)(v), (b),
110.17(e)(2), (f).
The lobbyist bundling disclosure
threshold for calendar year 2019 is
$18,700. This threshold amount may
change in 2020 based upon the annual
cost of living adjustment (COLA). As
soon as the adjusted threshold amount
is available, the Commission will
publish it in the Federal Register and
post it on its website. 11 CFR 104.22(g)
and 110.17(e)(2). For more information
on these requirements, see Federal
Register Notice 2009–03, 74 FR 7285
(February 17, 2009).
CALENDAR OF REPORTING DATES FOR WISCONSIN SPECIAL ELECTIONS
Close of
books 1
Report
Reg./cert. &
overnight
mailing
deadline
Filing
deadline
Committees Involved in Only the Special Primary (12/30/19) Must File
Pre-Primary ..................................................................................................................................
Year-End ......................................................................................................................................
12/10/19
12/31/19
2 12/15/19
01/31/20
12/18/19
01/31/20
Committees Involved in Both the Special Primary (12/30/19) and Special General (01/27/20) Must File
Pre-Primary ..................................................................................................................................
Pre-General & Year-End 3 ...........................................................................................................
Post-General ................................................................................................................................
April Quarterly ..............................................................................................................................
12/10/19
01/07/20
02/16/20
03/31/20
2 12/15/19
2
01/12/20
02/26/20
04/15/20
12/18/19
01/15/20
02/26/20
04/15/20
Committees Involved in Only the Special General (01/27/20) Must File
Year-End 3
Pre-General &
...........................................................................................................
Post-General ................................................................................................................................
April Quarterly ..............................................................................................................................
01/07/20
02/16/20
03/31/20
2 01/12/20
02/26/20
04/15/20
01/15/20
02/26/20
04/15/20
1 The reporting period always begins the day after the closing date of the last report filed. If the committee is new and has not previously filed
a report, the first report must cover all activity that occurred before the committee registered as a political committee up through the close of
books for the first report due.
2 Notice that the registered/certified & overnight mailing deadline falls on a weekend. The report should be postmarked on or before that date.
3 Committees should file a consolidated Pre-General & Year-End Report by the filing deadline of the Pre-General Report.
Dated: October 25, 2019.
On behalf of the Commission.
Ellen L. Weintraub,
Chair, Federal Election Commission.
[FR Doc. 2019–23764 Filed 10–30–19; 8:45 am]
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
[Docket No. OP–1681]
BILLING CODE 6715–01–P
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RIN 3064–ZA08
Request for Information on Application
of the Uniform Financial Institutions
Rating System
Federal Deposit Insurance
Corporation and Board of Governors of
the Federal Reserve System
ACTION: Notice and request for comment.
AGENCY:
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The Board of Governors of the
Federal Reserve System (FRB) and the
Federal Deposit Insurance Corporation
(FDIC) and (collectively, the agencies)
are seeking information and comments
from interested parties regarding the
consistency of ratings assigned by the
agencies under the Uniform Financial
Institutions Rating System (UFIRS). The
assigned ratings are commonly known
as CAMELS ratings. The agencies also
are interested in receiving feedback
concerning the current use of CAMELS
ratings by the agencies in their bank
application and enforcement action
processes.
SUMMARY:
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Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Notices
Comments must be received by
December 30, 2019
ADDRESSES: Board: You may submit
comments, identified by Docket No.
OP–1681, by any of the following
methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
• FAX: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann E. Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551. All public comments are
available from the Board’s website at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons or to remove personally
identifiable information at the
commenter’s request. Accordingly,
comments will not be edited to remove
any identifying or contact information.
Public comments may also be viewed
electronically or in paper in Room 146,
1709 New York Avenue NW,
Washington, DC 20006, between 9:00
a.m. and 5:00 p.m. on weekdays.
DATES:
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FDIC
You may submit comments, identified
by RIN 3064–ZA08, by any of the
following methods:
• Agency Website: https://
www.fdic.gov/regulations/laws/federal/.
Follow the instructions for submitting
comments on the Agency website.
• Email: Comments@fdic.gov. Include
the RIN 3064–ZA08 in the subject line
of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be
hand-delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7:00 a.m. and 5:00 p.m.
• Public Inspection: All comments
received must include the agency name
and RIN for this rulemaking. All
comments received will be posted
without change to https://www.fdic.gov/
regulations/laws/federal/—including
any personal information provided—for
public inspection. Paper copies of
public comments may be ordered from
the FDIC Public Information Center,
3501 North Fairfax Drive, Room E–1002,
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Arlington, VA 22226 by telephone at
(877) 275–3342 or (703) 562–2200.
FOR FURTHER INFORMATION CONTACT:
Board: Alex Kobulsky, Senior
Financial Institution Policy Analyst II,
(202) 452–2031, and Catherine Piche´,
Deputy Associate Director, (202) 452–
3793, Division of Supervision and
Regulation; or Patricia Yeh, Senior
Counsel, (202) 452–3089, Legal
Division, Board of Governors of the
Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. For
the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), (202) 263–4869.
FDIC: Rae-Ann Miller, Associate
Director, Risk Management Policy;
Samuel B. Lutz, Counsel Supervision
and Legislation Branch, Legal Division,
Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
Background Information
Section 10(d) of the Federal Deposit
Insurance Act (FDI Act) generally
requires the appropriate federal banking
agency for an insured depository
institution to conduct a full-scope, onsite examination at least once every 12
months, but permits a longer cycle—at
least once every 18 months—for insured
depository institutions that meet certain
criteria, including the requirement that
the insured depository institution must
have total assets below a specified size
limit.1 At the conclusion of an
examination, examination staff develop
findings and conclusions, which serve
as the primary basis for assessing the
condition of an insured depository
institution under the UFIRS.2 The
UFIRS is commonly called the CAMELS
rating system, which is an acronym of
the six evaluation components: Capital,
Asset Quality, Management, Earnings,
Liquidity, and Sensitivity to Market
Risk. In addition, the CAMELS rating
system contains an overall composite
rating.
The Federal Financial Institutions
Examination Council (FFIEC) 3 first
1 See Section 10(b) and 10(d) of the Federal
Deposit Insurance Act. 12 U.S.C. 1820(d). See also
83 FR 67033 (December 28, 2018).
2 Additional details on the conduct and rationale
of FDIC bank examinations can be found in the Risk
Management Manual of Examination Policies and
FRB examinations can be found in the Commercial
Bank Examination Manual, which is available at:
https://www.federalreserve.gov/publications/files/
cbem.pdf.
3 Federal Financial Institutions Examination
Council Act of 1978 (Pub. L. 95–630) (Nov. 10,
1978). Currently, the Director of the Consumer
Financial Protection Bureau, the Chair of the Board
of the FDIC, a governor of the Board of Governors
of the Federal Reserve System, the Chairman of the
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adopted the UFIRS in 1979 to provide
supervisors with a methodology for
evaluating the soundness of depository
institutions on a uniform basis. In
addition, the UFIRS promotes uniform
supervisory practices, and provides a
consistent mechanism for identifying
problem institutions.4 In December
1996, the UFIRS was revised after
public notice and comment.5 The
updated UFIRS added a component for
rating sensitivity to market risk. The
rating system was revised to clarify that
the component rating assessments
should consider an institution’s size, the
nature and complexity of its business
activities, and its risk profile; increase
emphasis on risk management; and
address additional complexities
associated with on- and off-balance
sheet investments of financial
institutions.
CAMELS Rating System
The UFIRS describes each rating
component, and includes a list of factors
that examiners evaluate when assigning
a rating to the institution. Examiners
assign CAMELS components and
composite ratings on a scale of ‘‘1’’ to
‘‘5.’’ A rating of ‘‘1’’ indicates the
highest rating, strongest performance
and risk management practices, and the
least degree of supervisory concern,
whereas a ‘‘5’’ indicates the lowest
rating, weakest performance, inadequate
risk management practices, and
therefore, the highest degree of
supervisory concern. Each component
rating contains risk management
considerations that emphasize the
ability of management to respond to
changing circumstances and to address
the risks that may arise from changing
business conditions or the initiation of
new activities or products and are an
important factor in evaluating a
financial institution’s overall risk profile
and the level of supervisory attention
warranted. Institutions are rated
individually based on their primary
Federal or state regulator’s assessment
of how each institution’s risk profile fits
the CAMELS definitions.
The agencies also conduct reviews
and examinations of institutions’
National Credit Union Administration, the
Comptroller of the Currency, and a representative
state regulator are voting members of the FFIEC.
The functions of the FFIEC Council include
establishing principals and standards, making
recommendations regarding supervisory matters
and adequacy of supervisory tools, and developing
a uniform reporting system.
4 See https://www.gao.gov/assets/100/98389.pdf.
5 See 61 FR 37472 (July, 18, 1996) and 61 FR
67021 (Dec. 19, 1996). See also SR letter 96–38,
‘‘Uniform Financial Institutions Rating System,’’
available at: https://www.federalreserve.gov/
boarddocs/srletters/1996/sr9638.htm.
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compliance with laws and regulations
related to anti-money laundering and
consumer protection. Examiners
consider the results and findings from
these and other types of examinations
and reviews, as appropriate, when
assigning component and composite
ratings under CAMELS.
The composite CAMELS rating bears
a close relationship to the assigned
component ratings. However, examiners
do not assign a composite rating by
computing an arithmetic average of the
component ratings. When assigning a
composite rating, examiners may give
some components more weight than
others depending on the situation and
risk of the institution. Assignment of a
composite rating may incorporate any
factor that bears significantly on the
overall condition and soundness of the
institution.
The agencies also conduct
examinations and reviews of certain
specialty areas, outside of the CAMELS
ratings, such as information
technology,6 asset management/trust,7
and government securities dealers or
clearing agencies.8 For the
aforementioned specialty areas, agencies
assign unique ratings to institutions.
These rating systems are excluded from
this RFI.
In addition to the regularly scheduled
examinations, the agencies conduct offsite institution surveillance and
monitoring that rely on relevant
financial regulatory reports (for
example, the Call Report) and
supervisory information. The purpose of
this monitoring is to identify
institutions exhibiting increased risk
profiles or financial deterioration
between examinations. The surveillance
process promotes timely supervisory
attention to these institutions and
directs examination resources to them.
Communication and Confidentiality of
CAMELS Ratings
Agencies typically communicate the
CAMELS ratings to an institution
through a formal, written report of
examination or other official agency
correspondence. The CAMELS ratings
and the report of examination or other
official agency correspondence are
property of the agencies and are
provided to the institution’s board of
directors and management for their
confidential use. The report of
examination and official
correspondence are strictly privileged
and confidential under applicable law,
and the agencies prohibit disclosure of
6 64
FR 3109 (Jan. 20, 1999).
FR 54704 (Oct. 13, 1998).
8 17 CFR 450.3.
7 63
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an institution’s CAMELS rating or report
of examination in any manner without
the primary federal regulator’s
permission, except in limited
circumstances specified in the law (12
U.S.C. 1817(a) and 1831m) and in the
agencies’ regulations.9
Implications of CAMELS Ratings
The CAMELS ratings have a number
of supervisory implications for
institutions. For instance, the agencies
increase supervisory activities, which
may include targeted examinations
between regularly scheduled
examinations, if an institution’s
CAMELS ratings are less than
satisfactory.
The agencies take CAMELS ratings
into account when evaluating
institutions’ filings, such as merging
with or acquiring another institution,
opening new branches, or engaging in
new activities.10 The agencies generally
expect an institution to be in
satisfactory condition, as reflected in its
CAMELS ratings, before effecting
expansion plans. The agencies expect an
institution in less-than-satisfactory
condition, or that has a less-thansatisfactory record of consumer
compliance or performance under the
Community Reinvestment Act to
concentrate their managerial and
financial resources on remediating their
deficiencies. An institution in less-thansatisfactory condition may seek
approval for an expansionary proposal;
however the agencies would consider
whether any proposed expansion would
compromise management’s efforts to
address the current deficiencies of the
institution.
Supervisors issue formal enforcement
actions to institutions to address
practices that the supervisors believe to
be unlawful, unsafe, or unsound.11 The
initial determination of whether formal
action is required usually results from
examination findings. As such,
composite and component ratings
9 See 12 CFR part 261. Any unauthorized
disclosure of the report may subject the person or
persons disclosing or receiving such information to
the penalties of Section 641 of the U.S. Criminal
Code (18 U.S.C. 641).
10 For the FRB see 12 CFR 208.3(b). See also SR
letter 14–2/CA letter 14–1, ‘‘Enhancing
Transparency in the Federal Reserve’s Applications
Process,’’ available at: https://
www.federalreserve.gov/supervisionreg/srletters/
sr1402.htm, and SR letter 13–7 CA letter 13–4,
‘‘State Member Bank Branching Considerations,’’
available at https://www.federalreserve.gov/
supervisionreg/srletters/sr1307.htm. For the FDIC,
see 12 CFR part 303 of the FDIC Rules and
Regulations—Filing Procedures and the FDIC
Statement of Policy on Bank Merger Transactions.
11 The Interagency Guidelines Establishing
Standards for Safety and Soundness are found in 12
CFR 208 appendix D–1 for the FRB and in 12 CFR
part 364 of the FDIC Rules and Regulations.
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58385
assigned under CAMELS are significant
indicators of the need for heightened
supervisory attention including
enforcement actions for more
problematic issues.12 The UFIRS states
that with respect to an institution with
a ‘‘4’’ composite rating, ‘‘close
supervisory attention is required, which
means, in most cases, formal
enforcement action is necessary to
address the problems.’’ The agencies
also utilize ratings in the
implementation of certain laws and
regulations.13
Request for Comments From Interested
Parties
The agencies are issuing this RFI to
seek public input regarding how
CAMELS ratings are assigned to
supervised institutions, and the
implications of such ratings in the
application and enforcement action
processes. This effort to seek comments
and information is consistent with the
agencies’ commitment to increase
transparency, improve efficiency,
support innovation, and provide
opportunities for public feedback. This
request for information is not a proposal
to modify the CAMELS rating
definitions. Such definitions were
issued through the FFIEC.
The agencies encourage comments
from interested members of the public,
including, but not limited to, insured
depository institutions, other financial
institutions or companies, individual
depositors and consumers, consumer
groups, trade associations, and other
members of the financial services
industry. Given confidentiality
requirements14 applicable to financial
institutions’ CAMELS ratings and other
report of examination findings and
conclusions, the agencies realize there
are limitations on responses regarding
the consistency of how CAMELS ratings
are assigned. The agencies, however,
welcome general comments that do not
breach these confidentiality
requirements.
Topics for Commenters
CAMELS Rating System
1. To what extent does each agency
assign composite and component ratings
12 Enforcement actions may be informal, such as
a Memorandum of Understanding, or formal, such
as an Order issued under Section 8(b) of the Federal
Deposit Insurance Act (FDI Act).
13 See, for example, section 10(d) of the FDI Act,
12 U.S.C. 1820(d); 12 CFR 337.12.
14 For the FRB, see 12 CFR 261 subpart C—
Confidential Information Made Available to
Supervised Financial Institutions and Financial
Institution Supervisory Agencies, Law Enforcement
Agencies, and Others in Certain Circumstances. For
the FDIC, see 12 CFR part 309—Disclosure of
Information.
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Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Notices
in a manner that is consistent with the
CAMELS rating system?
2. To what extent do the agencies
appropriately communicate and support
each rating after an on-site examination
or at the end of an examination cycle,
including communicating the effect of
each rating or finding on the composite
rating?
3. Does the agencies’ use of the
CAMELS rating system vary from one
examination, or examination cycle, to
the next? Please explain.
4. Are the agencies generally
consistent in their approach to assigning
CAMELS ratings to institutions when
compared to each other and across other
supervisory agencies? What practices, if
any, should the agencies consider
implementing to enhance the consistent
assignment of CAMELS ratings?
5. To what extent do the agencies
apply the CAMELS rating system in a
manner that is sufficiently flexible to
reflect differences between financial
institutions such as size, business
models, risks, and internal and external
operating environments, as well as
overall technological developments and
emerging risks?
6. To what extent does the scope of
supervisory work performed during an
examination cycle align with the
components of the CAMELS rating
system? Which areas, if any, should
receive more or less emphasis in order
to assign a CAMELS rating
appropriately?
7. What steps, if any, should the
agencies take to promote the consistent
application of the CAMELS framework
in the supervisory process?
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Implications of CAMELS Ratings
8. To what extent does an institution’s
condition, as reflected in its CAMELS
ratings, affect the agencies’ actions on
applications, particularly for new or
expanded business activities? To what
extent, if any, should the agencies
modify or clarify their approach?
9. To what extent do the CAMELS
ratings impact the issuance of
enforcement actions? To what extent
does the issuance of enforcement
actions impact CAMELS ratings? To
what extent, if any, should the agencies
modify or clarify their approach?
10. What steps, if any, should the
agencies take to promote the consistent
use of CAMELS ratings in applications
and enforcement matters?
By order of the Board of Governors of the
Federal Reserve System, October 17, 2019.
Ann E. Misback,
Secretary of the Board.
Dated at Washington, DC on October 17,
2019.
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Federal Deposit Insurance Corporation.
Annmarie Boyd,
Assistant Executive Secretary.
[FR Doc. 2019–23739 Filed 10–30–19; 8:45 am]
BILLING CODE P
FEDERAL TRADE COMMISSION
[File No. 172 3118]
Retina-X Studios, LLC; Analysis To Aid
Public Comment
Federal Trade Commission.
Proposed consent agreement;
request for comment.
AGENCY:
ACTION:
The consent agreement in this
matter settles alleged violations of
federal law prohibiting unfair or
deceptive acts or practices. The attached
Analysis to Aid Public Comment
describes both the allegations in the
complaint and the terms of the consent
order—embodied in the consent
agreement—that would settle these
allegations.
SUMMARY:
Comments must be received on
or before December 2, 2019.
ADDRESSES: Interested parties may file
comments online or on paper, by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write: ‘‘Retina-X Studios, LLC;
File No. 172 3118’’ on your comment,
and file your comment online at https://
www.regulations.gov by following the
instructions on the web-based form. If
you prefer to file your comment on
paper, mail your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
600 Pennsylvania Avenue NW, Suite
CC–5610 (Annex D), Washington, DC
20580, or deliver your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW,
5th Floor, Suite 5610 (Annex D),
Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Jacqueline Connor (202–326–2844),
Bureau of Consumer Protection, Federal
Trade Commission, 600 Pennsylvania
Avenue NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant
to Section 6(f) of the Federal Trade
Commission Act, 15 U.S.C. 46(f), and
FTC Rule 2.34, 16 CFR 2.34, notice is
hereby given that the above-captioned
consent agreement containing a consent
order to cease and desist, having been
filed with and accepted, subject to final
approval, by the Commission, has been
placed on the public record for a period
of thirty (30) days. The following
DATES:
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Analysis to Aid Public Comment
describes the terms of the consent
agreement and the allegations in the
complaint. An electronic copy of the
full text of the consent agreement
package can be obtained from the FTC
Home Page (for October 22, 2019), on
the World Wide Web, at https://
www.ftc.gov/news-events/commissionactions.
You can file a comment online or on
paper. For the Commission to consider
your comment, we must receive it on or
before December 2, 2019. Write ‘‘RetinaX Studios, LLC; File No. 172 3118’’ on
your comment. Your comment—
including your name and your state—
will be placed on the public record of
this proceeding, including, to the extent
practicable, on the https://
www.regulations.gov website.
Postal mail addressed to the
Commission is subject to delay due to
heightened security screening. As a
result, we encourage you to submit your
comments online through the https://
www.regulations.gov website.
If you prefer to file your comment on
paper, write ‘‘Retina-X Studios, LLC;
File No. 172 3118’’ on your comment
and on the envelope, and mail your
comment to the following address:
Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue
NW, Suite CC–5610 (Annex D),
Washington, DC 20580; or deliver your
comment to the following address:
Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th
Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible,
submit your paper comment to the
Commission by courier or overnight
service.
Because your comment will be placed
on the publicly accessible website at
https://www.regulations.gov, you are
solely responsible for making sure that
your comment does not include any
sensitive or confidential information. In
particular, your comment should not
include any sensitive personal
information, such as your or anyone
else’s Social Security number; date of
birth; driver’s license number or other
state identification number, or foreign
country equivalent; passport number;
financial account number; or credit or
debit card number. You are also solely
responsible for making sure that your
comment does not include any sensitive
health information, such as medical
records or other individually
identifiable health information. In
addition, your comment should not
include any ‘‘trade secret or any
commercial or financial information
which . . . is privileged or
confidential’’—as provided by Section
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]]>Agencies
[Federal Register Volume 84, Number 211 (Thursday, October 31, 2019)]
[Notices]
[Pages 58383-58386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23739]
=======================================================================
-----------------------------------------------------------------------
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
[Docket No. OP-1681]
RIN 3064-ZA08
Request for Information on Application of the Uniform Financial
Institutions Rating System
AGENCY: Federal Deposit Insurance Corporation and Board of Governors
of the Federal Reserve System
ACTION: Notice and request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (FRB) and
the Federal Deposit Insurance Corporation (FDIC) and (collectively, the
agencies) are seeking information and comments from interested parties
regarding the consistency of ratings assigned by the agencies under the
Uniform Financial Institutions Rating System (UFIRS). The assigned
ratings are commonly known as CAMELS ratings. The agencies also are
interested in receiving feedback concerning the current use of CAMELS
ratings by the agencies in their bank application and enforcement
action processes.
[[Page 58384]]
DATES: Comments must be received by December 30, 2019
ADDRESSES: Board: You may submit comments, identified by Docket No. OP-
1681, by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include docket
number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551. All public comments are available from the
Board's website at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or
to remove personally identifiable information at the commenter's
request. Accordingly, comments will not be edited to remove any
identifying or contact information. Public comments may also be viewed
electronically or in paper in Room 146, 1709 New York Avenue NW,
Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.
FDIC
You may submit comments, identified by RIN 3064-ZA08, by any of the
following methods:
Agency Website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the Agency
website.
Email: [email protected]. Include the RIN 3064-ZA08 in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
Hand Delivery: Comments may be hand-delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments received must include the
agency name and RIN for this rulemaking. All comments received will be
posted without change to https://www.fdic.gov/regulations/laws/federal/
--including any personal information provided--for public inspection.
Paper copies of public comments may be ordered from the FDIC Public
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington,
VA 22226 by telephone at (877) 275-3342 or (703) 562-2200.
FOR FURTHER INFORMATION CONTACT:
Board: Alex Kobulsky, Senior Financial Institution Policy Analyst
II, (202) 452-2031, and Catherine Pich[eacute], Deputy Associate
Director, (202) 452-3793, Division of Supervision and Regulation; or
Patricia Yeh, Senior Counsel, (202) 452-3089, Legal Division, Board of
Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For the hearing impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263-4869.
FDIC: Rae-Ann Miller, Associate Director, Risk Management Policy;
Samuel B. Lutz, Counsel Supervision and Legislation Branch, Legal
Division, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Background Information
Section 10(d) of the Federal Deposit Insurance Act (FDI Act)
generally requires the appropriate federal banking agency for an
insured depository institution to conduct a full-scope, on-site
examination at least once every 12 months, but permits a longer cycle--
at least once every 18 months--for insured depository institutions that
meet certain criteria, including the requirement that the insured
depository institution must have total assets below a specified size
limit.\1\ At the conclusion of an examination, examination staff
develop findings and conclusions, which serve as the primary basis for
assessing the condition of an insured depository institution under the
UFIRS.\2\ The UFIRS is commonly called the CAMELS rating system, which
is an acronym of the six evaluation components: Capital, Asset Quality,
Management, Earnings, Liquidity, and Sensitivity to Market Risk. In
addition, the CAMELS rating system contains an overall composite
rating.
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\1\ See Section 10(b) and 10(d) of the Federal Deposit Insurance
Act. 12 U.S.C. 1820(d). See also 83 FR 67033 (December 28, 2018).
\2\ Additional details on the conduct and rationale of FDIC bank
examinations can be found in the Risk Management Manual of
Examination Policies and FRB examinations can be found in the
Commercial Bank Examination Manual, which is available at: https://www.federalreserve.gov/publications/files/cbem.pdf.
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The Federal Financial Institutions Examination Council (FFIEC) \3\
first adopted the UFIRS in 1979 to provide supervisors with a
methodology for evaluating the soundness of depository institutions on
a uniform basis. In addition, the UFIRS promotes uniform supervisory
practices, and provides a consistent mechanism for identifying problem
institutions.\4\ In December 1996, the UFIRS was revised after public
notice and comment.\5\ The updated UFIRS added a component for rating
sensitivity to market risk. The rating system was revised to clarify
that the component rating assessments should consider an institution's
size, the nature and complexity of its business activities, and its
risk profile; increase emphasis on risk management; and address
additional complexities associated with on- and off-balance sheet
investments of financial institutions.
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\3\ Federal Financial Institutions Examination Council Act of
1978 (Pub. L. 95-630) (Nov. 10, 1978). Currently, the Director of
the Consumer Financial Protection Bureau, the Chair of the Board of
the FDIC, a governor of the Board of Governors of the Federal
Reserve System, the Chairman of the National Credit Union
Administration, the Comptroller of the Currency, and a
representative state regulator are voting members of the FFIEC. The
functions of the FFIEC Council include establishing principals and
standards, making recommendations regarding supervisory matters and
adequacy of supervisory tools, and developing a uniform reporting
system.
\4\ See https://www.gao.gov/assets/100/98389.pdf.
\5\ See 61 FR 37472 (July, 18, 1996) and 61 FR 67021 (Dec. 19,
1996). See also SR letter 96-38, ``Uniform Financial Institutions
Rating System,'' available at: https://www.federalreserve.gov/boarddocs/srletters/1996/sr9638.htm.
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CAMELS Rating System
The UFIRS describes each rating component, and includes a list of
factors that examiners evaluate when assigning a rating to the
institution. Examiners assign CAMELS components and composite ratings
on a scale of ``1'' to ``5.'' A rating of ``1'' indicates the highest
rating, strongest performance and risk management practices, and the
least degree of supervisory concern, whereas a ``5'' indicates the
lowest rating, weakest performance, inadequate risk management
practices, and therefore, the highest degree of supervisory concern.
Each component rating contains risk management considerations that
emphasize the ability of management to respond to changing
circumstances and to address the risks that may arise from changing
business conditions or the initiation of new activities or products and
are an important factor in evaluating a financial institution's overall
risk profile and the level of supervisory attention warranted.
Institutions are rated individually based on their primary Federal or
state regulator's assessment of how each institution's risk profile
fits the CAMELS definitions.
The agencies also conduct reviews and examinations of institutions'
[[Page 58385]]
compliance with laws and regulations related to anti-money laundering
and consumer protection. Examiners consider the results and findings
from these and other types of examinations and reviews, as appropriate,
when assigning component and composite ratings under CAMELS.
The composite CAMELS rating bears a close relationship to the
assigned component ratings. However, examiners do not assign a
composite rating by computing an arithmetic average of the component
ratings. When assigning a composite rating, examiners may give some
components more weight than others depending on the situation and risk
of the institution. Assignment of a composite rating may incorporate
any factor that bears significantly on the overall condition and
soundness of the institution.
The agencies also conduct examinations and reviews of certain
specialty areas, outside of the CAMELS ratings, such as information
technology,\6\ asset management/trust,\7\ and government securities
dealers or clearing agencies.\8\ For the aforementioned specialty
areas, agencies assign unique ratings to institutions. These rating
systems are excluded from this RFI.
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\6\ 64 FR 3109 (Jan. 20, 1999).
\7\ 63 FR 54704 (Oct. 13, 1998).
\8\ 17 CFR 450.3.
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In addition to the regularly scheduled examinations, the agencies
conduct off-site institution surveillance and monitoring that rely on
relevant financial regulatory reports (for example, the Call Report)
and supervisory information. The purpose of this monitoring is to
identify institutions exhibiting increased risk profiles or financial
deterioration between examinations. The surveillance process promotes
timely supervisory attention to these institutions and directs
examination resources to them.
Communication and Confidentiality of CAMELS Ratings
Agencies typically communicate the CAMELS ratings to an institution
through a formal, written report of examination or other official
agency correspondence. The CAMELS ratings and the report of examination
or other official agency correspondence are property of the agencies
and are provided to the institution's board of directors and management
for their confidential use. The report of examination and official
correspondence are strictly privileged and confidential under
applicable law, and the agencies prohibit disclosure of an
institution's CAMELS rating or report of examination in any manner
without the primary federal regulator's permission, except in limited
circumstances specified in the law (12 U.S.C. 1817(a) and 1831m) and in
the agencies' regulations.\9\
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\9\ See 12 CFR part 261. Any unauthorized disclosure of the
report may subject the person or persons disclosing or receiving
such information to the penalties of Section 641 of the U.S.
Criminal Code (18 U.S.C. 641).
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Implications of CAMELS Ratings
The CAMELS ratings have a number of supervisory implications for
institutions. For instance, the agencies increase supervisory
activities, which may include targeted examinations between regularly
scheduled examinations, if an institution's CAMELS ratings are less
than satisfactory.
The agencies take CAMELS ratings into account when evaluating
institutions' filings, such as merging with or acquiring another
institution, opening new branches, or engaging in new activities.\10\
The agencies generally expect an institution to be in satisfactory
condition, as reflected in its CAMELS ratings, before effecting
expansion plans. The agencies expect an institution in less-than-
satisfactory condition, or that has a less-than-satisfactory record of
consumer compliance or performance under the Community Reinvestment Act
to concentrate their managerial and financial resources on remediating
their deficiencies. An institution in less-than-satisfactory condition
may seek approval for an expansionary proposal; however the agencies
would consider whether any proposed expansion would compromise
management's efforts to address the current deficiencies of the
institution.
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\10\ For the FRB see 12 CFR 208.3(b). See also SR letter 14-2/CA
letter 14-1, ``Enhancing Transparency in the Federal Reserve's
Applications Process,'' available at: https://www.federalreserve.gov/supervisionreg/srletters/sr1402.htm, and SR
letter 13-7 CA letter 13-4, ``State Member Bank Branching
Considerations,'' available at https://www.federalreserve.gov/supervisionreg/srletters/sr1307.htm. For the FDIC, see 12 CFR part
303 of the FDIC Rules and Regulations--Filing Procedures and the
FDIC Statement of Policy on Bank Merger Transactions.
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Supervisors issue formal enforcement actions to institutions to
address practices that the supervisors believe to be unlawful, unsafe,
or unsound.\11\ The initial determination of whether formal action is
required usually results from examination findings. As such, composite
and component ratings assigned under CAMELS are significant indicators
of the need for heightened supervisory attention including enforcement
actions for more problematic issues.\12\ The UFIRS states that with
respect to an institution with a ``4'' composite rating, ``close
supervisory attention is required, which means, in most cases, formal
enforcement action is necessary to address the problems.'' The agencies
also utilize ratings in the implementation of certain laws and
regulations.\13\
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\11\ The Interagency Guidelines Establishing Standards for
Safety and Soundness are found in 12 CFR 208 appendix D-1 for the
FRB and in 12 CFR part 364 of the FDIC Rules and Regulations.
\12\ Enforcement actions may be informal, such as a Memorandum
of Understanding, or formal, such as an Order issued under Section
8(b) of the Federal Deposit Insurance Act (FDI Act).
\13\ See, for example, section 10(d) of the FDI Act, 12 U.S.C.
1820(d); 12 CFR 337.12.
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Request for Comments From Interested Parties
The agencies are issuing this RFI to seek public input regarding
how CAMELS ratings are assigned to supervised institutions, and the
implications of such ratings in the application and enforcement action
processes. This effort to seek comments and information is consistent
with the agencies' commitment to increase transparency, improve
efficiency, support innovation, and provide opportunities for public
feedback. This request for information is not a proposal to modify the
CAMELS rating definitions. Such definitions were issued through the
FFIEC.
The agencies encourage comments from interested members of the
public, including, but not limited to, insured depository institutions,
other financial institutions or companies, individual depositors and
consumers, consumer groups, trade associations, and other members of
the financial services industry. Given confidentiality requirements\14\
applicable to financial institutions' CAMELS ratings and other report
of examination findings and conclusions, the agencies realize there are
limitations on responses regarding the consistency of how CAMELS
ratings are assigned. The agencies, however, welcome general comments
that do not breach these confidentiality requirements.
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\14\ For the FRB, see 12 CFR 261 subpart C--Confidential
Information Made Available to Supervised Financial Institutions and
Financial Institution Supervisory Agencies, Law Enforcement
Agencies, and Others in Certain Circumstances. For the FDIC, see 12
CFR part 309--Disclosure of Information.
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Topics for Commenters
CAMELS Rating System
1. To what extent does each agency assign composite and component
ratings
[[Page 58386]]
in a manner that is consistent with the CAMELS rating system?
2. To what extent do the agencies appropriately communicate and
support each rating after an on-site examination or at the end of an
examination cycle, including communicating the effect of each rating or
finding on the composite rating?
3. Does the agencies' use of the CAMELS rating system vary from one
examination, or examination cycle, to the next? Please explain.
4. Are the agencies generally consistent in their approach to
assigning CAMELS ratings to institutions when compared to each other
and across other supervisory agencies? What practices, if any, should
the agencies consider implementing to enhance the consistent assignment
of CAMELS ratings?
5. To what extent do the agencies apply the CAMELS rating system in
a manner that is sufficiently flexible to reflect differences between
financial institutions such as size, business models, risks, and
internal and external operating environments, as well as overall
technological developments and emerging risks?
6. To what extent does the scope of supervisory work performed
during an examination cycle align with the components of the CAMELS
rating system? Which areas, if any, should receive more or less
emphasis in order to assign a CAMELS rating appropriately?
7. What steps, if any, should the agencies take to promote the
consistent application of the CAMELS framework in the supervisory
process?
Implications of CAMELS Ratings
8. To what extent does an institution's condition, as reflected in
its CAMELS ratings, affect the agencies' actions on applications,
particularly for new or expanded business activities? To what extent,
if any, should the agencies modify or clarify their approach?
9. To what extent do the CAMELS ratings impact the issuance of
enforcement actions? To what extent does the issuance of enforcement
actions impact CAMELS ratings? To what extent, if any, should the
agencies modify or clarify their approach?
10. What steps, if any, should the agencies take to promote the
consistent use of CAMELS ratings in applications and enforcement
matters?
By order of the Board of Governors of the Federal Reserve
System, October 17, 2019.
Ann E. Misback,
Secretary of the Board.
Dated at Washington, DC on October 17, 2019.
Federal Deposit Insurance Corporation.
Annmarie Boyd,
Assistant Executive Secretary.
[FR Doc. 2019-23739 Filed 10-30-19; 8:45 am]
BILLING CODE P
