Meaning
An essential supervisory tool for assessing financial institution health and performance.Definition
A supervisory rating system used by regulatory agencies to assess the overall health and performance of financial institutions.Components
The acronym stands for key aspects:- C – Capital Adequacy
- A – Asset Quality
- M – Management Quality
- E – Earnings
- L – Liquidity
- S – Sensitivity to Market Risk
Purpose
Bank supervisors use it to identify institutions needing attention, guiding actions. It determines a financial institution’s soundness, risk, and compliance, contributing to systemic stability.Author
