For banks to start lending again, even more intervention may be needed.

But lending would be inhibited even if the banks were healthier.

Critics point out that plain old bad lending by the commercial banks accounted for 90 of banks losses.

Their consequent reluctance to lend constrains investment.

There are a number of reasons why banks might suddenly stop or slow lending activity.

Consider what happens when banks in Texas, Florida, or California make bad lending decisions that threaten their survival.

Today, however, Spanish banks especially those most heavily engaged in domestic mortgage lending must pay a much higher spread over interbank rates to secure new funding.

But banks used all their political muscle to stop states from enacting laws to curtail predatory lending.

Regular banks, too, are trying to evade new regulations by ramping up off balance sheet lending.

Many of America s big banks moved out of the lending business and into the moving business.

Cable appears to believe the banks lobbyists when they claim that lending and growth would suffer if banks were forced to hold more capital.

But, unfortunately, the most obvious way for banks to increase their capital ratios is to curtail their lending.

The justification was that bailing out the banks, however messily, would enable a resumption of lending.

In fact, it is possible to regard excessive bank lending as a symptom of deeper economic flaws.

With so many banks in the US fragile, lending is likely to remain constrained.

Both started as NGOs (following the Grameen model) and received millions in grant money from development institutions to start lending operations. They also got access to low cost lending from government banks and multilateral institutions such as the International Finance Corporation (the World Bank s commercial lending arm) and the US Agency for International Development.

To see why, we need to understand why banks are still so reluctant.

But in bad times, when it is important to keep banks lending, bank capital would automatically be increased by the debt to equity conversion.

As a result, the banks have been focused on returning the bailout funds at the earliest opportunity, rather than using them to boost lending.

Bank regulation, like lending, was once decentralized and judgment based.

By offering to lend freely against collateral, they liquify assets and prevent banks from being forced to unload loans or securities at fire sale prices.

For Tigar, deleveraging has meant that banks that had pursued its business only a couple of years ago have suddenly cut lending even though the company never missed a debt payment.

The interest rate on these totally safe and liquid deposits induced the banks to maintain excess reserves at the Fed instead of lending and creating deposits to absorb the increased reserves, as they would have done before 2008.

In many countries, the fall in bank lending was partly offset by an increase in lending to governments, which thought that the banks should recycle society s savings directly into public sector spending.

The G 7 action plan aims to restore the flow of credit by securing interbank lending, and coordinated central bank actions have provided unprecedented levels of liquidity to the market.

Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.

The problem is that China has already done a lot to stimulate domestic demand, both through government spending and by directing its banks to lend.

The banks claim that lending remains constrained by a shortage of creditworthy borrowers, owing to the sick economy.

The study finds that CRA lending by larger banks does indeed respond more to a CRA examination.

Lending between banks, as well as deposits placed by large corporations, increased spectacularly in the years leading up to the crisis.

Commercial banks, flush with central banks money, advanced credit for many unsound investment projects, with the explosion of financial innovation (particularly of derivative instruments) fueling the lending frenzy.

Lending, too, is being transformed by technology. Crowdsourced funding and peer to peer lending schemes give borrowers the opportunity to circumvent many of the hurdles of traditional banking including, in some cases, collateral requirements and credit ratings.

So long as European banks remain undercapitalized and overleveraged, a sustainable recovery supported by robust bank lending is unlikely.

But safer, less indebted banks are better able to continue lending without becoming distressed or needing support.

On the other hand, perhaps banks reluctance to lend reflects a fear of being short of funds if investment opportunities get even better.

Lack of deleveraging will limit the ability of banks to lend, households to spend, and firms to invest.

LONDON It is generally agreed that the crisis of 2008 2009 was caused by excessive bank lending, and that the failure to recover adequately from it stems from banks refusal to lend, owing to their broken balance sheets.

Furthermore, many bank shareholders have suffered from the disruption in lending, either directly or via their businesses or employers.

Banning payouts to shareholders and requiring banks to raise funds by selling new shares would bolster them without restricting their ability to lend.

Lulled into complacency and excess by ample supplies of artificially cheap financing, Irish banks went on a lending binge.

Governments brought commercial banks under prudential regulation in exchange for public provision of deposit insurance and lender of last resort functions.

Those who believe that all was fine with the pre crisis economy except for banks making crazy loans are convinced that preventing such crises in the future requires only banking reform.

In today s credit crunch, as in the Great Depression, central banks lend at practically zero interest rates.

The implication is that emerging markets, while encouraging foreign banks entry, should at the same time strictly regulate such banks local lending practices.

In contrast to lending activities, banks commitment to foreign markets has remained virtually unaffected with respect to purely intermediary activities such as investment banking and asset management.