Using a proprietary, hand-collected database of 251 sanctions issued by national and international authorities on 109 European banks, we investigate the deterrent effect of governance effectiveness at the country level on detected bank misconduct from 2009 to 2019. We also examine the impact of detected bank misconduct on depositor behavior to investigate how customer reaction is shaped by media coverage. Our empirical strategy based on probit and panel fixed effects shows the existence of a deterrent effect exerted by country governance effectiveness. Moreover, the instrumental regressions show that depositors react to detected bank misconduct by withdrawing their funds and that this reaction is stronger when news coverage is high.