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and Yale. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We are grateful to the Initiative on Global Markets and the Fama-Miller Center at the University of Chicago Booth School of Business for funding. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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We develop and estimate an empirical model of the U.S. banking sector using data covering the largest U.S. banks over the period 2002-2013. Our model incorporates insured depositors and run-prone uninsured depositors who choose between differentiated banks. Banks compete for deposits and can endogenously default. We estimate demand for uninsured deposits and find that it declines with banks' financial distress, which is not the case for insured deposits demand. We calibrate the supply side of the model and find that the deposit elasticity to bank default is large enough to introduce the possibility of multiple equilibria, suggesting that banks can be very fragile. Last, we use our model to analyze the proposed bank regulatory changes. For example, our results suggest that the capital requirement below 17% can lead to significant instability in the banking system, and that a requirement of 31% maximizes the welfare of the worst equilibrium.