<p>Bank liquidity creation, that is, the process by which banks transform short term funding into longer term loans, is a key function of financial intermediation that supports economic activity. Over recent decades, however, banks have substantially expanded their off-balance-sheet activities, particularly through derivatives, raising questions about how this shift affects their ability to create liquidity on the balance sheet. This paper investigates whether greater off-balance-sheet exposure is associated with changes in on-balance liquidity creation, with a focus on foreign operations of global banks. Using a dataset on foreign branches of US banks, we show that higher off-balance-sheet exposure is associated with lower on-balance liquidity creation. Furthermore, this trade-off is found to be more pronounced in those host countries with tighter credit market regulations. These findings have implications for host-country policymakers because substitution toward off-balance-sheet intermediation may weaken local credit supply, complicating efforts to preserve domestic financial stability.</p>