How do EU banks’ funding costs respond to the CRD IV? An assessment based on the banking union directives database

Thomas Krause, Eleonora Sfrappini, Lena Tonzer and Cristina Zgherea

Journal of Financial Stability, 2025, vol. 78, issue C

Abstract: The establishment of the European Banking Union constitutes a major change in the regulatory framework of the banking system. Main parts are implemented via directives that show staggered transposition timing across EU member states. Based on the newly compiled Banking Union Directives Database, we assess how banks’ funding costs responded to the Capital Requirements Directive IV (CRD IV). We find evidence of a weak increase in funding costs that results from an increase in cost of equity which is mostly offset by a decline in cost of debt. The diverging trends stem from countries with an ex-ante lower regulatory capital stringency and an ex-post quicker activation of capital buffers, which is in line with banks’ short-run adjustment needs but longer-run benefits from increased financial stability.

Keywords: Banking union; CRD IV; Funding costs; Staggered difference-in-difference estimators (search for similar items in EconPapers)
JEL-codes: C52 G01 G18 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:78:y:2025:i:c:s1572308925000452

DOI: 10.1016/j.jfs.2025.101416

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