BHC rating System lesson

Question 1

R - risk management

Answer 1

Competence of board and senior management oversight
Policies, procedures, and limits
Risk monitoring and management information systems
Internal controls

Question 2

F - financial condition

Answer 2

Capital
Asset quality
Earnings
Liquidity

Question 3

I - Impact

Answer 3

Impact of the parent company and nondepository subsidiaries (collectively referred to as nondepository entities) on the subsidiary depository institutions

Question 4

C

Answer 4

Composite - single digit rating given to bank subsidiary after CAMELS

Question 5

For noncomplex institutions with consolidated assets of $1 billion or less, only the “R” component and “C” composite are assessed.

Answer 5

The “R” represents the primary regulator’s assessment of management-“M” from the CAMELS rating, and the “C” reflects the primary regulator’s composite rating of the bank subsidiary.

Question 6

D - depository institutions

Answer 6

this rating will generally reflect the primary regulator’s assessment

last digit composite rating after CAMELS

Question 7

BOPEC

Answer 7

the condition of the BHC’s 
Bank subsidiaries 
Other nonbank subsidiaries
Parent company 
Earnings, and 
Capital adequacy

Question 8

Given the CAMELS rating 223122/2, which answer would most likely reflect the “D” component rating for a BHC with consolidated assets greater than $1 billion, but only one bank subsidiary?

Answer 8

2- The “D” component is driven by the composite rating from the most recent subsidiary bank examination provided by the bank’s primary regulator.

Question 9

I

Answer 9

for Impact of nondepository entities on the depository subsidiary(ies)

A parent company’s risk management and financial issues may directly affect the depository subsidiary and
A non-bank entity’s risk management and financial issues may directly affect the depository subsidiary or indirectly affect the depository subsidiary through its impact on the parent company.

Question 10

D

Answer 10

Each subsidiary bank’s CAMELS composite rating, as determined by its primary regulator at the most recent examination, is used to rate the “D” component of RFI/C (D).