We use a novel, household opinions-based measure – Public Confidence in a Bank – to explore the role of bank-level and … banks publicly monitored during 2010–2017. We find that public confidence in a bank is highly sensitive to the industry …-level financial stability indicators, but less sensitive to bank-level risk characteristics. This result reveals an important role of …

inaccuracies. Without stress-tests, the regulator cannot observe bank’s type, and sets the same requirement across banks. Stress …-testing provides a noisy signal about the banks’ types, and enables bank specific surcharges, which can improve welfare. Yet, when … stress-tests are less accurate, they distort banks’ ex-ante incentives to improve their risk-return profiles. As a result …

choices respond to predictions derived from the corporate finance theory and/or to capital regulation. We find that banks …

progress towards a "pecking order theory" for private recapitalizations, our benchmark model identifies equity issuance as …