Banks are missing out on a unique investment opportunity that has arisen thanks to falling interest rates in the US because their balance sheets are too stretched, a sign the credit crunch will force them to forgo returns for another year.

The 2.25% cut in US interest rates over the past seven months should impact banks positively, both directly through lower funding costs and indirectly because banks can take advantage of the carry trade, where they borrow in low yielding assets to buy higher yielding ones.