WASHINGTON, May 19 (Reuters) - U.S. regulators have proposed an overhaul to a confidential rating system for banks, saying the changes would ensure that examiners grade the financial institutions primarily on their financial risks.
The proposed changes to the so-called "CAMELS" rating system, which examiners use to grade bank health across a range of categories, are likely to address longstanding industry concerns that the metric can be subjective and overly punitive.
The proposal was put forward by the Federal Financial Institutions Examination Council, which gathers leaders of the nation's bank and credit union regulators to adopt standard examination practices.
Federal Reserve Vice Chair for Supervision Michelle Bowman, who chairs the group, said in a statement that the changes mark "a decisive shift toward transparency, quantitative factors, and predictability of supervisory oversight."
Bowman has led an effort from Trump-appointed regulators to overhaul and streamline bank supervision, arguing that examiners need to refocus their efforts on core financial risks at banks, following industry complaints for years that they face deficiencies on a host of minor or process-related issues.
The ratings are critically important to bank leadership, as insufficient ratings can lead to penalties or business restrictions.
Reporting by Pete Schroeder; Editing by Mark Porter
