Uniform Financial Institutions Rating System

Listen to this article

7^th Circuit Court of Appeals

Case Name: Builders Ban v. Federal Deposit Insurance Corporation

Case No.: 16-2852

Officials: POSNER, EASTERBROOK, and SYKES, Circuit Judges

Focus: Uniform Financial Institutions Rating System

Builders Bank is insured and regulated by the Federal Deposit Insurance Corporation, which conducts a “full‐scope, on‐site examination” every 12 to 18 months. 12 U.S.C. §1820(d). After an examination in June 2015 the FDIC assigned the Bank a rating of 4 under the Uniform Financial Institutions Rating System. The parties call this a CAMELS rating, after the System’s six components: capital, asset quality, management, earnings, liquidity, and sensitivity. The highest rating is 1, the lowest 5. The Bank contends in this suit under the Administrative Procedure Act that its rating should have been 3 and that the lower rating is arbitrary and capricious. But the district court dismissed the suit for want of jurisdiction, ruling that the assignment of ratings is committed to agency discretion by law. 5 U.S.C. §701(a)(2)

Judgment vacated and remanded

Full Text

Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.