Waukesha Times

Congressman Scott Fitzgerald introduced the Halting Uncertain Methods and Practices in Supervision (HUMPS) Act, which aims to enhance transparency in bank evaluations. The bill successfully passed the House Financial Services Committee by voice vote. It mandates the Federal Financial Institutions Examination Council (FFIEC) to update the CAMELS rating system with clear standards for each component and revise the formula used for calculating a bank's overall rating. The legislation also seeks to reform or eliminate the subjective "Management" component, emphasizing measurable risk governance and internal controls.

"The HUMPS Act brings much-needed transparency and accountability to the bank rating process," stated Congressman Scott Fitzgerald. He emphasized that supervisory ratings should be based on transparent metrics rather than political bias or personal opinion, describing it as a necessary step to prevent debanking by removing subjectivity from banking oversight.

The CAMELS rating system is used by federal regulators to assess financial institutions' health and safety through various components such as Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. These confidential ratings influence decisions regarding mergers and acquisitions, deposit insurance premiums, and regulatory assessments of whether a bank is well-managed.

Currently, regulators have broad discretion within this framework, particularly concerning the "Management" component often based on subjective judgments. This has led to concerns about politicized supervision and debanking when banks downgrade due to undefined criteria may choose to avoid politically disfavored customers. Such actions could limit financial access and undermine trust in neutral bank oversight.

Supporters of the HUMPS Act include organizations like the American Bankers Association, America's Credit Unions, Bank Policy Institute, Financial Services Forum, and Wisconsin Bankers Association.