There are three major issues at play. The first is the massive capital constraint on banks. They have written down their toxic debt but you also have an estimated ￡300bn of global leveraged buyout debt that has become much less valuable and an unknown quantity of non-toxic debt. The second problem is the flight ofrnforeign banks from the UK. A lot of the extra funding in the system previously came from Iceland, Ireland, France and Spain, but banks are now focusing much more on their native clients.rnThe third issue is that banks are completely dysfunctional at the moment. They have new regulations and impending nationalisation to deal with and don't know what is coming next. About 135,000 global job cuts have been announced, but many of those haven't happened yet so there is a climate of intense fear.
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