Few would dare say it out loud, but what many developed countries could use right now is a mini credit boom fuelled by leveraged banks. The current approach to fixing the global banking sector is designed to prevent another banking crisis. It is the reverse of what is needed during economic stagnation, however.

The European Banking Authority’s view, for example, reflects the status quo. That 27 of the region’s banks have raised €94bn of new capital to meet a 9 per cent core tier one capital ratio is deemed a success. Andrea Enria, the EBA’s chairman, reckons “European banks are now in a stronger position, which should support lending to the real economy”. That statement is wrong in theory, and Europe’s economy continues to languish.

Banks with high capital adequacy ratios are merely flabbier. Yes, that helps when losses are sustained. But short of losses banks are actually weaker, not stronger. Less leverage equals smaller potential balance sheets as well as lower net income and returns on equity. Lending is constrained. Even a healthy lender such as Deutsche Bank has the same amount of loans outstanding in the first quarter of 2012 as two years ago. Ditto last week’s results at JPMorgan showed net business loans at a similar level to 2009.