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Hamilton’s Index Shows Strength in Financial Sector

Releasing its semi-annual index, ""Hamilton Place Strategies"":http://www.hamiltonplacestrategies.com/ and the ""Partnership for a Secure Financial Future"":http://www.ourfinancialfuture.com/ found that the ""safety and soundness"" of the nation's financial services industry is improving.


The most recent Hamilton Financial Index (HFI) showed a value of 1.22, which is 22 percent higher than the ""historical norm.""

Based on data through the first quarter of 2012, the HFI is up seven points from February's findings. According to Hamilton's statistics, current totals represent a significant increase over the index's low point of 0.46, as recorded during the third quarter of 2008.

The HFI, which combines analysis for systemic risk and capital levels into one measurement, credited rising levels of Tier 1


capital for the index's gains. Hamilton states that bank capital stands ""at an all-time high,"" creating a stronger ""buffer against systemic stress.""

Additionally, Hamilton revealed that U.S. banks have cut their exposure to the European periphery by an estimated 16 percent.

Hamilton also noted that banks have limited their exposure to Europe as a whole by around 8 percent.

However, the HFI results also indicated a ""fiscal cliff"" continues to approach due to the country's debt ceiling, tax rate increases, and sequestration.

In an official release, Hamilton predicted that catalysts could drive the U.S. toward ""the largest fiscal contraction in four decades, potentially causing a 4 percent drop in GDP and significant reductions in consumer demand and business investment.""

Still, Hamilton partner and co-author of the HFI, Matt McDonald, stated, ""The Hamilton Financial Index continues to show that the financial services industry is safer and stronger than at any time before the financial crisis. U.S. banks have increased their capitalization to record levels through many efforts, in part to satisfy future regulatory requirements, but also to strengthen their banks.

""The financial industry has shown that it can strengthen itself and adapt to new risks as they arise, despite the significant challenges to the U.S. and global economies,"" concluded McDonald.

About Author: Abby Gregory


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