Bank ownership type and temporal evolution of long‐term bank funding in the period 2005-2017

Abstract

This study uses a large panel dataset of Western European banks to examine the determinants of bank funding stability. Banks are divided into three categories by bank ownership type; the ownership types in this study are commercial banks, cooperative banks and savings banks. Three sources of stable bank funding are investigated: customer deposits, equity, and long-term liabilities. Furthermore, the sum of these funding components is used as a proxy variable for a bank's total available stable funding (ASF). A special focus is on the temporal evolution of these funding types. The regression results show that commercial banks’ funding became much more stable in the period 2005–2017. However, that funding remains, on average, less stable than does cooperative and savings banks’ funding. In addition, funding stability has remained at the pre-crisis level in cooperative and savings banks, despite a steep dip in cooperative banks’ ASF during the sovereign debt crisis. Furthermore, banks substantially decreased financing from long-term liabilities after the financial crisis, replacing it with customer deposits and equity.