The rating system is designed such that the examiner is able to consider and reflect all significant financial and operational factors for evaluating the performance. The ratings signify the safety and soundness of the bank that is concerned.
This is a clear indication of strong performance and risk management practices. Banks and institutions in this group are not affected by the external disturbances. There are minor weaknesses in the system and can be handled very easily by the management.
This indicates satisfactory performance of the bank. These are able to withstand external fluctuations. The weaknesses in the system can develop into conditions of concern (Wirz, 2012).
This indicates a less satisfactory, flawed performance. These are nominally able to resist the external disturbances. The weakness in the system is so much that failure is only a remote probability.
This indicates poor performance and needs some serious concern. Such systems are hardly viable to any disturbance. The weakness in the entire system is hardly absent.
This indicates highly deficit performance. The systems can hardly be corrected by any management. The severity of problems in such institutions is at peak. The failure is highly expected (Wirz, 2012).
It is considered that the banks with ratings of 1 or 2 pose little to no supervisory concerns and are highly performance oriented. The banks with ratings 3, 4 or 5 present medium to extreme supervisory concern. These are fragile and more prone to even the smallest stirs in the financial stability and market risks.