Résumé
This paper investigates the relationship between the net stable funding ratio (NSFR) and bank stability in Europe over the 2007-2022 period. By employing a two-step GMM panel model, we find a positive and significant link between the NSFR and banking stability in the European Union which is however stronger for banks located in the euro area than those in the non-euro area. Moreover, our results show that, within the euro area itself, for banks operating outside the core euro area, stronger liquidity positions do not translate into higher stability but conversely to higher instability. Overall, our findings highlight strong differences into how liquidity requirements relate to bank stability within the European union and also within the euro area itself which call for action by bank regulators.