Bank Examination

Financially, um...turn your head and cough. A bank examination is a review process to ensure that a bank or lending institution is financially stable, as well as in compliance with federal banking regulations.

The CAMELS is a system used to rate banks.

The components of a bank's condition that are assessed by the CAMELS system 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.

A bank in a rural area was going through its annual review. At the conclusion of the review, the examiner came in to present his findings. He said "This bank needs to adopt a more conservative approach to lending. You can't allow loans for exotic animals!" The bank officers were confused, "We don't understand. What are you talking about?" The examiner slapped down a sheet of paper and pointed to a transaction. "You approved a loan for this rancher to buy 500 exotic birds, ewes!" The bank guys waited a moment trying to figure out why the examiner pronounced the word u-wees. Then the bank president spoke up, "Sir, I think you mean kiwis. The rancher bought ewes; a ewe is a female sheep."