Bank Safety and Soundness

The term “safety and soundness” refers to what was discussed in the Regulatory Compliance section, i.e., stability, competitiveness and fairness. Put more simply, safety and soundness deals with the health, or condition, of banks individually and as a group.

It is important for directors to know the health of their bank. One of several ways to organize an assessment of your bank’s safety and soundness is to follow the Uniform Financial Institutions Rating System used by the federal banking regulators. Under this system, the regulators evaluate and rate a bank’s financial condition, operational controls and compliance in six areas (click the areas to go straight to that lesson):

This module is structured around the CAMELS rating system, so called because of the acronym formed by the first letter of each area.