"Banks are more profitable…have more capital & they're making more loans." - Federal Reserve Chairman Ben Bernanke, July 18, 2012
The semi-annual Hamilton Financial Index offers a snapshot of the financial services industry’s safety and soundness – and the picture continues to show strong progress in the industry’s ability to handle potential risk. Merging systemic risk and capital levels of banks and insurers into one measurement, the latest Hamilton Financial Index shows that financial institutions are substantially safer today than any time before the financial crisis in 2008.
Key findings from the July 2012 report include:
- The Hamilton Financial Index (HFI) rose seven points since the previous quarter and stands at 1.22 as of the end of the first quarter. Banks’ increase in Tier 1 capital is driving the rise in the HFI.
- While the European debt crisis presents risks to the global economy, from the end of the first quarter of 2011 through the first quarter of 2012, U.S. banks reduced exposure to the European periphery by over 16 percent and Europe as a whole by eight percent.
- Our policy spotlight found that the upcoming fiscal cliff could be the largest fiscal contraction in four decades, potentially causing a significant drop in consumer demand and business investment. The fiscal cliff is further complicated by elevated U.S. debt and annual deficits, a politically contentious debt ceiling debate, constraints on the Fed, and the slowing of the global economy.