The financial services industry is in far better shape today than than in the time leading up to the 2008 financial collapse, said participants in a Washington D.C.-based financial roundtable who gathered Tuesday to launch the Hamilton Financial Index, a semi-annual 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 both 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 Tier I Common Capital Ratio, which measures a financial institution's ability to absorb unexpected loss.

The Hamilton Financial Index is sponsored by the Partnership for a Secure Financial Future. The partnership includes the Consumer Bankers Association, Mortgage Bankers Association, Financial Services Institute and The Financial Services Roundtable.

"The state of the financial industry is darn good and will grow," said Steve Bartlett, president and CEO of the Financial Services Roundtable, who served as Tuesday's panel moderator. "Financial industry indicators are are all pointing up." 

Financial Services Institute (FSI) President and CEO, Dale Brown said the new index will provide a more accurate and comprehensive snapshot of the actual health of the financial services industry. "While it is a common misconception that financial services firms are only on Wall Street, we must not forget many in the industry thrive on Main Street, and are critical to the financial futures of Main Street Americans," he said. "This report demonstrates the importance of the industry for hard-working Americans as well as the industry becoming safer and stronger."

Matt McDonald, partner at Hamilton Place Strategies, and index co-author, said the first index economic indicators are promising. "Whether we look at capital levels, liquidity, asset quality, or exposure to risk, the accepted benchmarks for the financial industry have been improving dramatically across the board," he said.

McDonald says one sign the financial services industry may be on the upswing: an increasing pile of capital held by banks. He says bank deposits have been up of late and there's now more lending to businesses. "All the metrics are now going in the right direction. Banks have been recapitalizing," he said. "Even with Europe's economy faltering, we are at a level far higher than we were. We are in a much stronger financial position than we were before the 2008 financial crisis."

Steve McMillin, partner of Gramm Partners LLC and co-author of the index, concurred that most indicators point to the economy -- albeit slowly -- growing. "Across the board, you can look at every economic statistic and things are going well," he said. "And all of this significant improvement happened in the face of serious headwinds."

However, index authors acknowledge that signs of economic weakness are still evident, says McDonald, including a 30 percent decrease in free bank-checking accounts.

Tony Fratto partner, Hamilton Place Strategies and co-author of the report, says there's two questions currently in the back of Americans' minds about the financial industry. "They also want to know 'What effect does this particular financial event have on our economic future?'" and "Are financial institutions -- the banks, insurance companies -- going to contribute? Are they going to be strong economic supports in years moving forward?'"

McDonald says for banks to make a even bigger contribution to a recovery, they need to be more open to risk taking by making loans to businesses and consumers. "The housing industry is still significantly down from prior to the 2008 market collapse," says McDonald, "but it's far better off from where it was."

McDonald says they hope their report reaches a "broad rather than just technical audience." However, Fratto acknowledged that disseminating the index message will "take time, greater education and knowledge."

Other key findings of the Hamilton Financial index include:

It is now 15 percent above normal levels for safety and soundness.

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.

Insurance firms' capital and surpluses are also at all-time highs, despite an increase in unexpected expenses from natural disasters in 2011.

Insurance companies had record payouts to many individuals who suffered from natural disasters in 2011.

While business loans have lagged due to a slow recovery, consumer loans increased dramatically during the recession, helping individuals weather the crisis.

The private sector continued to reduce outstanding debt in 2011, declining 17 percent from the highs.

The total U.S. retirement market is valued at $17 trillion, an increase of 21 percent since 2008

-Jim McConville