In response to the global financial crisis of 2007-2009, the focus on financial stability concerns has understandably been dominant in the discussion of international financial reform, posing a challenge to domestic policymakers facing the trade-off between financial stability and allocative efficiency of financial intermediation. In this paper, I conduct a cross-country analysis to investigate whether the efficiency level of a financial system can be deemed as one of the explaining factors of the financial crisis. After deriving summary measures of efficiency and propensity to financial distress in the banking system, I find significant statistical association between the two mentioned metrics and the crisis of 2007-2009, although the measure of propensity to financial distress is found to be a better predictor of the crisis than the efficiency one. I also find evidence in favor of the hypothesis that there is a trade-off between financial stability and efficiency of financial intermediation, and, more specifically, that larger buffer stocks of capital may actually curtail intermediation activity. Moreover, there is a clear indication that high- and non-high-income countries are on the opposite ends of the stability vs. efficiency spectrum. Non-high-income countries, with less efficient, less globally integrated, and more capitalized financial systems, appeared to be more protected against the global crisis. This suggests that, although the current focus on improved prudential regulation must be maintained, there is not much room for one-size-fits-all regulatory reform proposals, even if these proposals come on behalf of the necessary global governance. Instead, domestic regulators in non-highincome countries must also consider other context-specific structural and institutional reforms, in order to improve the efficiency level of their financial systems.