The CAMELS framework assigns composite ratings to US-regulated financial institutions across six components: Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. Those ratings carry substantial regulatory consequences, shaping institutions’ ability to pursue acquisitions, open branches and expand product lines. A downgrade in any component can trigger supervisory restrictions that outlast the specific finding by months or years.

A central recommendation in the AFC’s letter concerns the weighting of the Management component. Phil Goldfeder, chief executive of the AFC, argued that the current framework can produce composite ratings that are disproportionately influenced by isolated governance findings rather than the overall financial condition of an institution. Ian Moloney, the AFC’s chief policy officer, was more direct: “Supervisory ratings carry significant regulatory consequences that extend well beyond the examination process itself, influencing everything from expansion opportunities to merger activity. Eliminating the disproportionate weight historically placed on the Management component and ensuring that all six CAMELS components are properly structured will ensure composite ratings represent a more accurate, balanced reflection of an institution’s overall risk profile.”

The AFC also called for a technology-neutral examination standard, arguing that the rapid growth of bank-fintech partnerships and technology-enabled product delivery has rendered parts of the legacy framework structurally misaligned with how supervised institutions now operate. Under the proposed principle, examiners would assess governance and risk management effectiveness rather than the specific technology model or vendor used to deliver a given service.

The AFC’s submission lands at a moment of heightened scrutiny of the bank-fintech partnership model in the United States.

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