This paper studies large banks’ incentives to engage in misconduct by abusing their dominant position in the market for loans and by mis-selling an add-on financial product to depositors. We draw new connections between stability-focused prudential regulation and misconduct by studying the impact of higher capital requirements on misconduct incentives. Higher capital requirements are more likely to increase misconduct incentives when incumbents enjoy a significant equity funding cost advantage over challenger banks. These results highlight the importance of regulatory coordination in the areas of bank conduct and financial stability.