Davis Polk partner and Financial Institutions practice co-head Margaret Tahyar was quoted in Risk.net discussing proposed changes to the CAMELS rating system, which would reduce the emphasis on the management component – the “M” in CAMELS.  

The Federal Financial Institutions Examination Council proposed revisions would shift supervision toward material financial risks and away from highly subjective or overly process-oriented factors. The article notes that the management component of the CAMELS rating system is the only element assessed without a quantitative metric behind it.

“What [regulators] are saying is the management rating isn’t going away, but it doesn’t get to be the over-indexed dumping ground for anything you want it to be,” Margaret said.

Discussing how this change addresses the previous overemphasis on management and moves away from box-ticking toward more meaningful assessments, Margaret explained, “The supervisory staff haven’t been given the freedom or authority by their leadership to focus on material financial risks. They have been focused on enormous process checklists.”

“If you over-index the qualitative, you end up with what vice-chair Bowman has called the ‘odd mismatch’ of banks that are strong in the rest of the alphabet but not in Management,” Margaret added. “I think that can happen in a bank here and there, but why is it happening across many banks in the system?”

“How US regulators could stop management driving Camels,” Risk.net (July 15, 2026) (subscription required)

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