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The objective of this study is to explore the causal relationship between bank capital and liquidity creation. Based on this result, the research investigates the structural relationship among bank capital, liquidity creation, and bank performance. To estimate this form of causal relationship, the study uses Granger causality model (VAR) and linear structural model (SEM) adjusted by the Satorra-Bentler method for panel data. The result of VAR estimation indicates that there is a causal relationship between bank capital and liquidity creation. In SEM model, the lag of bank capital has impact on the liquidity and bank performance. If a bank reduces its bank capital at a particular time, liquidity creation will increase later. And this has a positive effect on bank performance. In this case, the liquidity creation plays the role of mediator variable reducing the negative impact of the bank capital on bank performance.