This empirical study investigates whether a strong bank culture may help strengthen, weaken, or have no effect on the relationship between regulatory capital and liquidity creation. Using a machine learning approach and banks’ 10-K reports, we first measure the corporate culture of selected bank holding companies (BHCs) in the United State (U.S.) over the period between 1995 and 2019. We find that bank culture does affect the link between regulatory capital and liquidity creation. In particular, while we find that regulatory capital has a negative impact on bank liquidity creation, a strong culture in a bank weakens this negative association. We also find that an increase in asset-side liquidity creation is the main channel through which bank culture exerts its moderating role. Finally, our results are largely driven by smaller banks, banks with a more traditional funding structure and more profitable banks. The results of this study suggest that regulators should consider bank culture as being a crucial element in the monitoring approach when designing bank regulation and supervision.

Wealth Management Products (WMPs) have become a major source of bank funding over the past decade. Using a unique WMP transactions dataset from China covering 99,893 transactions during 2010-2020, this study examines whether greater reliance on WMPs as a type of funding innovation increases bank systemic risk. We find that higher WMP dependence significantly elevates systemic risk, with the effects concentrated among smaller banks. Exploiting the 2018 Asset Management Regulation as an exogenous shock, we establish causality using a difference-in-differences approach. Our channel analysis shows that maturity mismatch amplifies WMP-related systemic risk, while higher WMP yields further increase fragility through funding cost pressures. Overall, these results call for a regulatory approach that moves beyond aggregate balance-sheet metrics and instead targets funding composition, maturity structure, and pricing behaviour-dimensions in which WMPs materially increase systemic vulnerability.