Spring Thaw?

Every spring, the thawing of the Yellow River threatens lives and property across Inner Mongolia. Ice blocks break free and then pile up further downstream, causing floods and dam bursts. The Chinese army often has to shoot cannonballs at the ice to restore the river's normal flow.

Governments around the world have taken a similar approach to freeing up the frozen banking system: blast away at blockages in liquidity so that banks can resume channeling funds to businesses. But it looks to be a long winter, as many lenders simply aren't ready — or willing — to see their capital dislodged. As much as they may profess to care about corporate customers, commercial banks have made their own survival priority number one.

"A couple of years ago, banking was all about leveraging capital and growing [earnings per share]," says Michael Reinhard, CFO of National Penn Bancshares, a Pennsylvania-based community bank with $9 billion (€7 billion) in assets. "Now it's about generating capital and preserving it."

What do banks have to do before they feel comfortable making loans again? Plenty. For one thing, raising capital is still a struggle, despite the bailout largesse. Also, risk management, both credit and otherwise, has to be retooled, especially with regulators, shareholders and lawyers breathing down bankers' necks. Then there is the problem of disclosure: almost everyone is clamoring for banks to come clean about the quality of their balance sheets, many of which — particularly in the US and the UK — are still riddled with toxic mortgage-related assets.