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CAMELS Methodology | Market Risk Identification, Evaluation and Managing Risk Conditions - CCAR and CLAR

Instructor: Robert Geary
Product ID: 704669
  • Duration: 60 Min
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This training webinar discusses CAMELS components in terms of the regulators’ evaluation methodology. It covers how these considerations translate into the rating of each component and the formulation of a bank’s CAMELS composite rating. In addition, the instructor explains two related evaluations: CCARS which is a “Comprehensive Capital Assessment and Review”, and CLAR which is a “Comprehensive Liquidity Assessment and Review” and how to rate bank’s capital adequacy and liquidity adequacy.

Why Should You Attend:

CAMELS is one of the most significant evaluation methodologies for banks employed by US regulators, namely the Federal Reserve Bank, Comptroller of the Currency and Federal Deposit Insurance Corporation. CAMELS is the titling of the rating system employed by these regulators with the titling standing for each of the components contained in the evaluation methodology. Specifically, a bank’s condition is evaluated with respect to: Capital, Assets, Management, Earnings, Liquidity and Sensitivity to Market Risk. The evaluation system is intense and quite detailed and, based on a bank’s CAMELS evaluation, a bank is given a rating for each individual CAMELS component as well as an overall composite rating. It is imperative that a bank understand the CAMELS evaluation process, how the evaluation of each component is formulated, how ratings are established and the impact of a rating on a bank’s present and planned business initiatives. The understanding of CAMELS must exist with executive management, senior business management as well as with all staff responsibility for the management of the elements of each CAMELS component.

This presentation addresses:

The evaluation considerations that is applied for each CAMELS component

  • how these considerations translate into the rating of each component
  • the meaning of each component rating
  • actions that may be required by a rating
  • the formulation of a bank’s CAMELS composite rating
  • the meaning of a composite rating

Commensurate with the CAMELS evaluation, the FRB conducts two related evaluations:

  • CCARS which is a “Comprehensive Capital Assessment and Review”, and
  • CLAR which is a “Comprehensive Liquidity Assessment and Review”

Both these evaluations not only test a bank’s capital adequacy and liquidity adequacy, they also address a bank’s management policies, procedures and practices that ensure a bank’s ongoing ability to maintain appropriate capital and liquidity management standards.

Areas Covered in the Webinar:

With respect to CAMELS, Areas Covered in the Session

  • Identify the CAMELS components
  • Assessment of Capital quality
    • Financial condition; Capital needs; Problem loans; Reserves
  • Assessment of Asset quality
    • Credit initiation practices; Substandard credit quality; Diversification; Reserves; Securities underwriting; Counterparty exposures; Loan policies; Credit management; MIS; Documentation
  • Assessment of Management quality
    • General quality; Planning; Policies and controls; MIS; Risk monitoring; Audit responses; Depth and succession; Performance and risk profile
  • Assessment of Earnings quality
    • Level; Retained earnings; General quality; Expenses; Budgeting and forecasting; Loan loss provisions; Market risk exposure
  • Assessment of Liquidity quality
    • Liquidity sources; Asset liquidity; Funding sources; Liability maturity structure; Deposit stability; Asset securitization; General management
  • Assessment of Sensitivity to Market Risk quality
    • Economic change; Measurement; Nature of risk; Trading activity
  • Component rating methodology
    • Rating denotations and formulation
    • Proposed/required actions
  • Composite rating methodology
    • Rating denotations, formulation and implications

With respect to CCAR and CLAR, Areas Covered in the Session:

  • Objectives of CCAR & CLAR
  • CCAR &CLAR methodologies & evaluation components
  • Bank Management considerations
  • Evaluation results & consequences

Who Will Benefit:

  • Board of Directors
  • Executive Managers
  • Senior Business Managers
  • Senior Credit Management
  • Treasury Managers
  • Dedicated Risk Managers
  • Dedicated Compliance Managers
  • Auditors
  • University Banking Program Educators
  • Regulator Staff

Instructor Profile:

Robert Geary is the founder of Greenwich Risk Management Advisory Services, LLC, and serves as the principal consultant on many of the firm’s consultancy mandates. He has been a banking and finance industry professional for 41 years and has spent 34 years with JP Morgan Chase & Co in various roles pertaining to senior treasury, financial market, asset management and risk management.

Earlier in his career, Mr. Geary managed Chase Manhattan Bank’s euro and other offshore funding activities and was the bank’s first Asia/Pacific area treasury and financial markets executive located in Hong Kong. There for five years, he had overall functional management responsibility for the treasury, currency trading/sales activities and securities portfolios of Chase’s branches in nine countries in the region that included the major centers of Japan, Hong Kong and Singapore. Later in his career, he served for three years as western hemisphere area treasury and financial markets executive with similar responsibilities for Chase’s branches in South America, Canada, Panama and Puerto Rico, and went onto serve the institution in other financial market line positions.

For the last 6 years of his career with JP Morgan Chase, Mr. Geary had undertaken risk management oversight roles including head of market, credit and operational risk management for Chase Asset Management and being managing director of fiduciary risk management across the firm.

He has served on the board of directors of Chase Manhattan Overseas Banking Corporation as well as on numerous senior committees that included Chase’s Portfolio and Investment Strategy Committee, Tax Committee, International Asset/Liability Management Committee, Chase Investment Policy Committee, and Capital Markets & FX Risk Management Committee. Prior to joining Chase, he held positions at Chemical Bank, Chrysler Financial Corporation and National Bank of North America. Mr. Geary holds a BA degree in economics from Pace University and did graduate studies in finance at New York University Graduate School of Business. He is also currently a member of the Executive Advisory Board of St. John’s University Department of Accounting and Taxation.

Topic Background:

The US bank business environment has experienced a variety of issues and problems over the years and US regulators are diligent in ensuring that a bank meets a required standard in key operating areas of a bank which, if not met or are considered substandard, may impact the ongoing viability of a bank. The US regulators continue to engage in improving their assessment methodologies and monitoring processes of banks, thereby increasing the level of bank management attention to the subject areas being evaluated.

Management responsibility to the subject areas of the CAMELs evaluation exits with a bank’s:

  • Board of Directors
  • Executive management
  • Senior business management

However, the specific management of each subject area rests with the staff that is charged with the responsibility of meeting and maintaining the standards set by the regulators for each component.

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