We evaluate the joint impact of structural liquidity regulation and unconventional monetary policy on Eurozone banks’ lending. Using an extensive bank-level quarterly dataset from 2008 to 2020, we study the introduction of the Net Stable Funding Ratio (NSFR) under Basel III and the European Central Bank’s Longer-Term Refinancing Operations (LTROs) and Targeted LTROs (TLTROs). We find that while the NSFR had no effect on aggregate lending, it led to an increase in short-term lending and a reduction in long-term lending, consistent with lower maturity transformation. LTRO participation is associated with higher medium- and long-term lending, and our results indicate that this effect is conditional on banks’ structural liquidity positions: banks with rising NSFRs were able to use LTRO and TLTRO funding to sustain long-term credit supply. These findings suggest that central bank liquidity interventions can mitigate the adjustment costs of tighter liquidity regulation during the transition period, enabling banks close to regulatory compliance to maintain longer-maturity lending.

Using a large sample of European listed banks, we investigate the relationship between a bank’s business model and systemic risk between 2005 and 2020, a period which includes various episodes of instability. Our findings indicate that, during tranquil periods, banks with different business models exhibit similar sensitivity to systemic risk. However, during periods of instability, the type of business model becomes critical: investment banks contribute more to and are more exposed to systemic risk. Distinguishing between endogenous and exogenous crises, our results reveal that market-oriented banks contribute more to systemic risk when instability is endogenous to the financial sector. Conversely, focused retail banks consistently show lower contributions and exposures to systemic risk. Additionally, our findings highlight the importance of business model migrations in reducing systemic risk. Banks transitioning from diversified to more retail-oriented models reduce their systemic risk, whereas migrations in the opposite direction do not exhibit the same benefit. These findings underscore the importance of maintaining diverse business models in the banking sector to enhance financial stability. • The study investigates the relationship between a bank’s business model and systemic risk. • During tranquil periods, banks with different business models exhibit similar sensitivity to systemic risk. • During periods of instability, investment banks contribute more to and are more exposed to systemic risk. • Market-oriented banks contribute more to systemic risk when instability is endogenous to the financial sector. • Focused retail banks show lower contributions to and exposures to systemic risk across different crisis periods.

This paper evaluates the impact of financial sector reforms on the cost structure characteristics and on the ownership–cost efficiency relationship in Indian banking. It also examines the impact of reforms on the dynamics of competition in the lending market. We find evidence that deregulation improves banks performance and fosters competition in the lending market. Results suggest technological progress, once Indian commercial banks have adjusted to the new regulatory environment. This, however, does not translate in efficiency gains. There is also evidence of an ownership effect on the level and pattern of efficiency change. Finally, competition keeps building pace even in the re-regulation period and technological improvements are not hampered by the tightening of prudential norms.

The global financial crisis underscored the importance of regulation and supervision to a well-functioning banking system that efficiently channels financial resources into investment. In this paper, we contribute to the ongoing policy debate by assessing whether compliance with international regulatory standards and protocols enhances bank operating efficiency. We focus specifically on the adoption of international capital standards and the Basel Core Principles for Effective Bank Supervision (BCP). The relationship between bank efficiency and regulatory compliance is investigated using the Simar and Wilson (2007. J. Econ. 136 (1), 31) double bootstrapping approach on an international sample of publicly listed banks. Our results indicate that overall BCP compliance, or indeed compliance with any of its individual chapters, has no association with bank efficiency.