On CAMEL Ratings and ATM Lawsuits
By. Henry Meier
I hate to kick a dead horse (actually my wife says I love kicking dead horses), but in today’s paper is an article that last January the O.C.C. downgraded the management category of J.P. Morgan’s CAMEL rating from a 2 to a 3. It is not yet clear whether J.P. Morgan’s composite CAMEL was downgraded as a result. The article intrigued me for several reasons, not least because it’s nice to see the big guys subjected to some of the same regulatory pressure faced by everyday financial institutions. In theory, that should not be big news, but in reality it is.
What really intrigues me more, though, about the news is that it once again highlights NCUA’s grotesque overreaction to the decision of North Carolina’s State Employees Credit Union to release its CAMEL rating with the approval of its state regulator. I should not have to remind you that NCUA punished North Carolina state chartered financial institutions by conducting its own examination of these entities until such time as North Carolina’s banking regulator cried uncle and promised not to authorize the release of the sacrosanct ratings again. I wonder if the O.C.C. is conducting an internal investigation this morning as to how this ratings information was disclosed to the public. I wonder if they are preparing for an onslaught of members running to their own institutions demanding to know how their management acumen was assessed in their latest examination? My guess is no. The O.C.C. has better things to do and, at the end of the day, the public is better off knowing that examiners are questioning J.P. Morgan’s management. It will better enable shareholders to more carefully hold one of the largest banks in the world accountable for overseeing its assets.
Which brings me back to NCUA. It argues that publicly disclosing CAMEL ratings will damage other credit unions that choose not to disclose this information. I guess in a worse case scenario members might actually start refusing to join or pulling their money out of credit unions with low CAMEL ratings. The public doesn’t understand that CAMEL ratings are ultimately an examiners snapshot in time and by keeping them private, regulators can scrutinize credit union performance and give credit unions the opportunity to make necessary improvements outside of the public spotlight.
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