Administration of The Law
CAMELS ratings are being used by the United States government to help it decide which banks to provide special help for and which to not as part of its capitalization program authorized by the Emergency Economic Stabilization Act of 2008.
The New York Times states: "The criteria being used to choose who gets money appears to be setting the stage for consolidation in the industry by favoring those most likely to survive" because the criteria appears to favor the financially best off banks and banks too big to let fail. Some lawmakers are upset that the capitalization program will end up culling banks in their districts.
Known aspects of the capitalization program "suggest that the government may be loosely defining what constitutes healthy institutions. that have been profitable over the last year are the most likely to receive capital. Banks that have lost money over the last year, however, must pass additional tests. They are also asking if a bank has enough capital and reserves to withstand severe losses to its construction loan portfolio, nonperforming loans and other troubled assets." Some banks received capital with the understanding the banks would try to find a merger partner. To receive capital under the program banks are also "required to provide a specific business plan for the next two or three years and explain how they plan to deploy the capital."
Read more about this topic: Emergency Economic Stabilization Act Of 2008
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