Interest rates have been kept at historically low levels by the Federal Reserve since the Great Recession began in 2008. The intent behind this was to spur loan activity and borrowing to grow the economy.

However, a combination of factors has led some of the largest banks in the United States, with cash flooding in at unprecedented levels, to cut their lending to the lowest level in five years. The average loan-to-deposit ratio for the top eight commercial banks fell to 84% in the fourth quarter from 87% a year earlier and 101% in 2007, according to data compiled by Credit Suisse Group A.G. (NYSE: CS). Lending as a proportion of deposits dropped at five of the banks and was unchanged at two, the data shows.

J.P. Morgan Chase & Co. (NYSE: JPM), which is the largest U.S. bank by assets, had the lowest year-end ratio in the group at 61%, down from 66% in 2011. Citigroup Inc. (NYSE: C) saw its ratio fall to 70% from 76% last year. North Carolina-based Bank of America Corp. (NYSE: BAC) dropped to 84% from 92%. Those lending ratios are the lowest at both banks in the past five years. Even southeastern regional bank leader, Sun Trust Banks Inc. (NYSE: STI) decreased to 94% from 96%.

Not all U.S. banks have seen declines. The loan-to-deposit ratios at Wells Fargo & Co. (NYSE: WFC) and U.S. Bancorp (NYSE: USB) remained virtually unchanged, while loans at PNC Financial Services Group Inc. (NYSE: PNC) actually grew.

With interest rates at lows and the economy at least somewhat better than in the dark days of 2008 and 2009, why has lending stalled? The first blush is to blame the banks, but the fact is they are drowning in liquidity and are desperately trying to make loans. Regulations and the memory of the collapse five years ago has tempered their ability to find retail or small business borrowers who can meet very stringent current credit standards. Simultaneously, many of the major U.S. banks have seen commercial and corporate clients hold on to cash and boost deposits while waiting for a meaningful improvement in the economy.

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Some banks are taking action to counter weak loan demand. Regions Financial Corp. (NYSE: RF), Alabama’s biggest bank, has focused on specific specialty niches that are growing and attracting businesses backed by private equity, as well as industries that have rebounded such as energy, health care and technology.

One other factor that looms for banks is that interest rates are at record lows. While they would rather have loan business than mountains of deposits, they are almost assured of the prospect of rising interest rates. This will end up cutting into the value of loans made while rates hovered near all-time lows. For bank management, this is a bleak prospect. The irony is that rising rates would help many banks on their deposit margins, but not on loans.

Clearly the economy is slowly but surely improving. The housing market has improved and stock markets are approaching all-time highs as investor appetite for risk has grown. The threat of a European collapse also has diminished over the past year. However, unemployment is still stubbornly high and the memories of 2008 are still vivid for many. It will be difficult for the economy to make great progress until borrowing and lending grow again.

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