Understanding H.R.3379: HUMPS Act of 2025

The HUMPS Act of 2025 proposes changes to the CAMELS rating system, which is used by regulators to assess the health of banks. CAMELS stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Currently, these ratings can be subjective, meaning different examiners might give different scores for the same bank. The bill wants to make these ratings more objective by using clear and measurable criteria. One of the major changes is to focus more on a bank's financial health and solvency. This means that the ratings should reflect how stable and secure a bank is financially. The bill also suggests either removing the "Management" component of the rating or changing it so that it only includes measurable factors like governance and risk controls, rather than opinions about the quality of management. The bill requires federal banking agencies to work together to create new rules based on recommendations from the Federal Financial Institutions Examination Council (FFIEC). These agencies will have a year to come up with these rules after the FFIEC makes its recommendations. The public will also have a chance to comment on these proposed rules. Finally, the bill makes a small change to the definition of "well managed" in existing banking laws to align with the updated CAMELS framework. This is mostly a cleanup to ensure everything matches the new system.

For everyday Americans, this bill could mean more reliable and fair assessments of the banks they rely on. If banks are rated more consistently, it could lead to a more stable banking system, which is important for everyone who uses banks for savings, loans, and other financial services. Banks, especially smaller community banks, could benefit from more predictable and fair evaluations. This might help them compete more effectively and avoid unnecessary regulatory burdens. On the other hand, the changes could also mean more work for banks as they adapt to new criteria and processes. Overall, the bill aims to create a more transparent and accountable banking system. By focusing on objective measures, it seeks to ensure that banks are judged fairly and consistently, which could lead to a healthier financial environment for everyone.

- Reduces Subjectivity: Supporters argue that the bill will make bank ratings more consistent and fair by using clear, objective criteria. - Increases Transparency: The bill requires a transparent methodology, making it easier for everyone to understand why a bank received a particular rating. - Focuses on Solvency: By concentrating on a bank's financial health, the bill aims to prevent sudden bank failures and promote stability. - Limits Subjective Management Ratings: By revising or removing the Management component, the bill seeks to avoid ratings based on personal opinions. - Low Cost: The Congressional Budget Office estimates that the bill will have a minimal financial impact on federal spending.

- Weakens Qualitative Supervision: Critics worry that focusing too much on numbers could overlook important qualitative factors like management quality. - Reduces Flexibility: The emphasis on objective criteria might limit examiners' ability to respond to new or emerging risks. - Potential for "Box-Checking": There is a concern that banks might focus on meeting specific metrics rather than genuinely improving their practices. - Implementation Challenges: Revising the rating system could be costly and complex for both regulators and banks, especially smaller institutions. - Risk of Industry Influence: Public comment periods could allow large banks to shape the criteria in ways that benefit them.