This time last year, banks were falling over themselves to apologise to shareholders for the losses they had racked up in their trading books. But having raised additional capital earlier in 2008, they were still managing to sound fairly confident. "The group is now well positioned to operate in the more challenging economic environment," said HBOS's chief executive at the time of its 2008 half-year results. Less than three months later, Lehman Brothers was in administration, the banking system was in meltdown, and HBOS had collapsed into the arms of Lloyds TSB.
The problem then was banks' exposure to derivative products. As securities backed by toxic assets such as US sub-prime mortgage derivatives began to lose credibility, banks were forced into a capital consuming process of writing down their value. The scale of the problem was such that banks became wary of lending to each other, which meant a big hike in the cost of interbank funding.
A year on, though, and that hugely costly asset-backed securities crisis has largely worked its way through the global banking system. Even before last autumn's huge government bail-out here in the UK - the total cost to the taxpayer is estimated at about £50bn - banks were busy writing off huge chunks of their exposure. For example, Royal Bank of Scotland's impairments for the first half of 2008 were almost £6bn, most of it against the treasury book.
It wasn't enough, though. The government ended up a 43 per cent slice of Lloyds and 70 per cent of RBS. And those that didn't turn to the state - Barclays, Standard Chartered and HSBC - have all raised substantial fresh funds from shareholders.
But the liquidity crisis - the dearth of interbank funding that spelled the end for lenders as Northern Rock - does appear to have come to an end. Helped by massive levels of central bank intervention, the key three month sterling Libor rate has fallen to under 1 per cent, from over 6 per cent last September.
