Title: Liquidity creation and convergence in the EU27 commercial banking sector

Authors: Dimitrios G. Giantsios; Simeon Papadopoulos

Addresses: Department of Accounting and Finance, School of Business Administration, University of Macedonia, 156 Egnatia Str., 546 36, Thessaloniki, Greece ' Department of Accounting and Finance, School of Business Administration, University of Macedonia, 156 Egnatia Str., 546 36, Thessaloniki, Greece

Abstract: In this paper, we examine the creation of liquidity in the European commercial banking sector. Our dataset comprises 1,064 privately owned commercial banks across all 27 EU member states, yielding 8,128 yearly observations for the period 2012-2021. We first measure the extent of liquidity creation and then assess whether banks' capacities to generate liquidity have converged across member states or whether significant disparities persist. On average, the liquidity created on - and off-balance sheet - amounts to approximately 33% of total assets in the European banking sector. Our results indicate that full convergence in liquidity creation among EU-27 banking systems has not been achieved. Instead, we identify six distinct subgroups of banks that exhibit convergence within their respective clusters. When off-balance sheet liquidity creation is excluded, the analysis reveals four converging subgroups of banks. Robustness checks confirm these findings: while convergence across the EU banking sector as a whole is absent, partial convergence is evident through the formation of subgroups of national banking systems with similar liquidity creation dynamics.

Keywords: liquidity creation; European banking; liquidity creation convergence; integration; Phillips and Sul convergence method.

DOI: 10.1504/IJBAAF.2026.155765

International Journal of Banking, Accounting and Finance, 2026 Vol.16 No.1, pp.64 - 94

Accepted: 05 Nov 2025
Published online: 13 Aug 2026 *

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