Proposed HUMPS Act Overhauls Bank Ratings: Less Subjectivity, More Transparency in Financial Oversight

If you’ve ever felt like your annual performance review was based on subjective vibes rather than clear metrics, you understand the core issue the Halting Uncertain Methods and Practices in Supervision Act of 2025 (the HUMPS Act) is trying to fix in the world of bank regulation. This bill takes aim at the CAMELS rating system—the report card regulators use to judge how healthy and safe a bank is. These ratings aren't just for show; they determine everything from whether a bank can merge to how much it pays for deposit insurance. The HUMPS Act mandates a major overhaul to make the entire process less about a supervisor’s gut feeling and more about objective, measurable data.

The CAMELS Report Card Gets a Rewrite

The central piece of this legislation requires the Federal Financial Institutions Examination Council (FFIEC) to redesign the CAMELS system. Right now, critics argue that similar banks can get wildly different ratings because the standards are too loose. This bill aims to fix that by forcing regulators to create clear, objective standards for every single component of the rating. The final score calculation must be transparent and based only on those objective criteria. Think of it like moving from grading an essay based on "overall impression" to grading it based on a strict rubric where every point is clearly defined. The goal, according to the bill, is to ensure the rating focuses squarely on a bank’s core financial health and risk level.

Where the 'Management' Component Could Go Missing

One of the most interesting and potentially controversial parts of the HUMPS Act focuses on the 'M' in CAMELS, which stands for Management. The bill gives regulators two options: either eliminate the management component entirely, or rewrite it so it only looks at objective factors like governance structure and risk controls. This is a big deal. Currently, the management rating allows examiners to assess the quality of a bank's leadership, culture, and strategic decision-making—qualitative stuff that doesn't always show up immediately on a balance sheet. If this component is eliminated, it means a bank with great-looking numbers but terrible, risky leadership could potentially get a better overall rating. For those who value nuanced oversight, this is a major concern, as it trades qualitative judgment for quantitative simplicity.

Transparency and New Rules for 'Well Managed'

The bill also adds a modern requirement: the final rating must now explicitly consider whether the institution is following rules related to anti-money laundering (AML) and counter-terrorist financing. This formalizes AML compliance as a non-negotiable factor in a bank's official health assessment. Furthermore, the HUMPS Act simplifies the definition of a "well managed" bank holding company, essentially tying that status directly and solely to achieving a satisfactory CAMEL rating. For the industry, this streamlines the regulatory language, but it also removes some older, specific requirements, potentially lowering the bar slightly for what qualifies as "well managed."

The Implementation Timeline

Once the FFIEC makes its recommendations, the federal financial regulatory agencies have 12 months to issue official rules to put the new CAMELS system into place. Crucially, they must first publish a proposal and give the public at least 90 days to comment. This public comment period is where the rubber meets the road, allowing individuals and institutions to weigh in on what those "objective standards" should actually look like. While the move toward consistency is a clear benefit for banks seeking predictable regulation, the vagueness around what constitutes an "objective standard" and the potential loss of qualitative oversight in the management component mean the devil will absolutely be in those future details.