This assumption is supported by recent regulatory changes, like the Basel III frameworkand its Liquidity Coverage Ratio (LCR) and Net Stable Funding(NSF) Ratio, or the Dodd–Frank Act with its proposed liquidity stresstests.Yet, in spite of this alleged importance and the ample theoreticevidence behind it, no paper has so far analyzed the relation betweenliquidity risk and credit risk on a broad range and in its differentdimensions across the banking sector. As a consequence, manyimportant questions regarding this topic remain unanswered: whatis the general relationship between liquidity risks and credit risks inbanks? Do liquidity and credit risk jointly influence banks’ probabilityof default (PD)? If so, do banks manage both risks together?