Index points to healthier financial services industry
Index points to healthier financial services industry
The financial services industry is in far better shape today than in the time leading up to the 2008 financial collapse, said participants in a Washington, D.C.financial roundtable. They gathered on Tuesday to launch the Hamilton Financial Index, a semiannual report designed to give a snapshot of the health of the financial services industry.
The new index, created by Hamilton Place Strategies, measures the safety and soundness of the financial services industry and merges systemic risk and capital levels by using two commonly accepted metrics: the St. Louis Federal Reserve Financial Stress Index, which measures 18 stress indicators, and the Tier I Common Capital Ratio, which measures a financial institution’s ability to absorb unexpected loss. Index values above the base value of 1 represent a healthy market.
As of the fourth quarter of 2011, the Hamilton Financial Index was valued at 1.15, or 15 percent above the historical norm. That value is down from a high of 1.24 in the second quarter of 2011, though significantly higher than the index bottom of 0.46 in the third quarter of 2008.
The index report found that U.S. commercial banks’ Tier 1 Common Capital levels are at an all-time high and the ratio of loans to deposits has declined 20 percent since 2007, pointing to a strong foundation for more lending. Additionally, insurance firms’ capital and surpluses are also at all-time highs, despite an increase in unexpected claims payouts due to natural disasters in 2011.
“The state of the financial industry is darn good and will grow,” said Steve Bartlett, president and CEO of the Financial Services Roundtable. “Financial industry indicators are all pointing up.”
The financial services industry is in far better shape today than in the time leading up to the 2008 financial collapse, said participants in a Washington, D.C. financial roundtable. They gathered on Tuesday to launch the Hamilton Financial Index, a semiannual report designed to give a snapshot of the health of the financial services industry.
The new index, created by Hamilton Place Strategies, measures the safety and soundness of the financial services industry and merges systemic risk and capital levels by using two commonly accepted metrics: the St. Louis Federal Reserve Financial Stress Index, which measures 18 stress indicators, and the Tier I Common Capital Ratio, which measures a financial institution’s ability to absorb unexpected loss. Index values above the base value of 1 represent a healthy market.
As of the fourth quarter of 2011, the Hamilton Financial Index was valued at 1.15, or 15 percent above the historical norm. That value is down from a high of 1.24 in the second quarter of 2011, though significantly higher than the index bottom of 0.46 in the third quarter of 2008.
The index report found that U.S. commercial banks’ Tier 1 Common Capital levels are at an all-time high and the ratio of loans to deposits has declined 20 percent since 2007, pointing to a strong foundation for more lending. Additionally, insurance firms’ capital and surpluses are also at all-time highs, despite an increase in unexpected claims payouts due to natural disasters in 2011.
“The state of the financial industry is darn good and will grow,” said Steve Bartlett, president and CEO of the Financial Services Roundtable. “Financial industry indicators are all pointing up.”
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