ABSTRACT: With the worldwide dispersion of COVID-19, banking sector, among others, needs to adapt to unexpected challenges. For this purpose, this study examines the impact of sustainable banking regulations on bank-specific characteristics pre and during COVID19 period in Pakistan for the period spanning from 2006 to 2020. Moreover, financial stability is employed to test its moderating role on sustainable banking regulations. The dynamic estimator, named the system-Generalized Method of Moments, is used to analyze the endogenous nature of the data. Findings suggest that capital adequacy ratio, deposit ratio, and loan ratio are positive whereas leverage ratios are negatively related to profitability and market return. Overall, findings reveal that sustainable banking regulations influenced the bank-specific characteristics substantially. Importantly, the year-wise averages of variables reveal that Pakistani banks have made significant improvements in profitability, market return, capital adequacy, and deposit ratio pre and during pandemic era. Additionally, the financial stability significantly moderates the relationship highlighting lower default risk and the effectiveness of sustainable banking operations. Practically, despite global lockdowns, economic and trade restrictions during COVID-19, State Bank of Pakistan, sustained health of banking sector through its well-regulated monitoring mechanism.