Banks are trying madly to raise it, investors are wary of giving it, and lenders seem keener than ever to hang on to it. Strange, then, that we hear so little about how to manage the scarce resource of the day: capital. One reason for the lack of discussion is the sorry current state of the art of capital management. In the run-up to Basel II, banks treated the subject with appropriate energy. But as the global expansion after 2001 turned into a full-fledged boom, capital was plentiful and cheap, and a strategy to manage it was not only unnecessary but even, arguably, counterproductive. According to some, banks that worried about improving their capital usage were thinking too small and missing much bigger opportunities in rapidly expanding businesses. Whatever their view, most banks paid only scant attention to the husbanding of their capital.

Now, at a time when regulators, investors, and rating agencies, in various ways, are forcing banks to deleverage and increase capital ratios, the focus is on finding more of it—that is, on recapitalization. Of late, however, the search has yielded very little. Capital, when it can be found, is extremely expensive. Effective capital management is no longer just a nice, if somewhat obscure, skill to have; for some banks, it is a question of survival.