The Halting Uncertain Methods and Practices in Supervision (HUMPS) Act, introduced by Rep. Scott Fitzgerald, passed the House Financial Services Committee late last month with bipartisan support.
The bill, which now awaits consideration by the full House of Representatives, would reform the way in which banks are rated. "The HUMPS Act brings much-needed transparency and accountability to the bank rating process," said Fitzgerald. "The CAMELS rating system has a real impact on how banks operate — but right now, it gives regulators too much room to apply double standards. This bill ensures that supervisory ratings are based on transparent, quantifiable metrics, not political bias or personal opinion. It’s a necessary step to prevent debanking by removing subjectivity from banking oversight."
The legislation seeks to reform the CAMELS rating system — long a cornerstone of bank supervision — by establishing clearer, more objective standards. In particular, it calls for the "Management" component, which critics argue gives regulators excessive discretion, to be reformed or eliminated entirely. The bill would also direct the Federal Financial Institutions Examination Council (FFIEC) to update the system’s formula to reflect these changes.
CAMELS ratings play a pivotal role in determining deposit insurance costs, merger approvals, and access to certain regulatory benefits. Yet critics charge that the “M” in CAMELS often rests on qualitative judgments. According to Fitzgerald, this opens the door to bias, particularly in cases where banks serve controversial industries or clients. Unsurprisingly, the bill has found support among the industry and its advocates, including the American Bankers Association, the Bank Policy Institute, and the Financial Services Forum.
In a just-published op-ed in the American Banker, and in a longer Weekend Reading article, Starling Founder & CEO Stephen Scott argues that, while the HUMPS Act aims to address a real problem, the answer to opaque supervision is not to retreat from judgment, but to modernize it.
"We don't need to replace a flawed system with no system at all," he writes. "We need to replace it with a system built for the complexity and stakes of modern finance — one that allows some degree of supervisory judgment regarding management and governance quality will persist, but that calls for it to be grounded in a common evidentiary basis."
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