This paper examines how bank loans evolve following unexpected deposit flows. Using bank-level U.S. commercial banks' data, we show that while large banks' lending is largely unaffected, loans at small banks significantly change after deposit shocks. Furthermore, the extent of this change among small banks depends on their exposure to off-balance-sheet liquidity risk, proxied by the level of unused commitments. Small banks with higher off-balance sheet exposures tend to extend fewer new loans following positive deposit shocks, suggesting that liquidity absorbed from the failure of other banks or market disruptions might not as easily be lent again to borrowers. Overall, these findings emphasize how off-balance-sheet risks can constrain the credit supply channel, even in the presence of liquidity surpluses.

Using detailed ownership data for a sample of European commercial banks, we analyze the link between ownership structure and risk in both privately owned and publicly held banks. We consider five categories of shareholders that are specific to our dataset. We find that ownership structure is significant in explaining risk differences but mainly for privately owned banks. A higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. In addition, institutional investors and non-financial companies impose the riskiest strategies when they hold higher stakes. For publicly held banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of publicly held banks, such that ownership structure is no longer a determinant in explaining risk differences. However, higher stakes of banking institutions in publicly held banks are associated with lower credit and default risk.