Bank Rating

  

Categories: Banking, Regulations

Banks are rated by a lot of agencies. If you Google "bank rating," there are a number of different services rating banks, including Bankrate, Bauer Financial, Creative Investment Research, Fitch, IDC Financial, Moody's, Sheshunoff Information Service, Veribank. A veritable smorgasbord of rating services, available for a fee. They make their money, um...rating banks. Duh.

However, the crux of it all is that those services are using financial statements combined with on-site examinations conducted by supervisory regulatory agencies. In the U.S., the official supervisory regulatory agencies include the Federal Reserve, the Office of the Comptroller of the Currency, the National Credit Union Administration (NCUA), the Farm Credit Administration, and the Federal Deposit Insurance Corporation (FDIC).

The backbone of a bank's rating is the CAMELS rating. (You really can't make this stuff up). The components of a bank's condition (CAMELS rating) are:

· (C)apital adequacy
· (A)ssets
· (M)anagement Capability
· (E)arnings
· (L)iquidity (also called asset liability management)
· (S)ensitivity (sensitivity to market risk, especially interest rate risk)

Ratings are given from 1 (best) to 5 (worst) in each of the above categories. The compilation of the ratings gives the public an indication of the stability of bank A or bank B, etc.

With banking, as in the desert, ride the CAMELS.

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867-53-09, yeah we know there. So yeah you know when you go to the grocery

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store and the cashier swipes your apples eight times across that little bar code [Apple being scanned]

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reader thingy and it doesn't work again and again and again and then she finally [Error coming up on the screen]

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pulls back the plastic from where the Apple was tagged hunts for her glasses [Cashier putting on her glasses]

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manually types it in. Well that's the fruit equivalent of a CUSIP number [Guy talking in a supermarket]

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A CUSIP number is well just that only applied to securities, stocks, bonds even

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muni bonds. CUSIP stands for committee on uniforms security identification [The meaning of each letter is shown]

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procedures, and is basically just the serial number system of securities, but [CUSIP definition written on a 100 dollar bill]

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coca-cola shares when it went public a gazillion years ago. Then the next two [The fix 6 digits are highlighted]

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characters refer to that type of security at hand like is it a basic

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equity bond, muni bond and the ninth digit is riboflavin yeah it's just there

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to be sure the other digits are all accurate and assures that there's no [The 3 digits meaning are shown]

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replication in any of the other CUSIP index number sets. So yeah CUSIP numbers

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make the securities easier to track because it's awfully hard to get a

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microchip into one of them. [Microchip pulled out of a bond certificate]

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