This study analyzes the effect of environmental, social, and governance (ESG) performance on banking stability in the digital era for a selected group of European banking institutions. Unlike many research, this paper incorporates the digital environment in which the European banking system operates into its investigation to capture the relationship between ESG scores, digitization, and bank stability from 2005 to 2022. This study uses a regimeswitching model to investigate the non-linear hypothesis of the relationship, an aspect that has received insufficient attention in previous research. The empirical results confirm the non-linearity between ESG performance and banking stability in the digital era, identifying three ESG performance regimes. Moreover, higher ESG scores are associated with a lower risk of bank failure, aligning with stakeholder theory. Finally, European banks with weak ESG scores fail to avoid the fragility caused by investments in technological infrastructure. Overall, our results suggest that critics and proponents of banks' commitment to social responsibility are, to some extent, right. Indeed, low or moderate ESG performance (Regimes 1 and 2) aligns with the classical perspective, while high ESG engagement (Regime 3) is consistent with the stakeholder view. Consequently, European banks need to adopt a digital strategy based on improving sustainability to leverage the positive impact of digitization and ESG performance on bank stability. On the policymakers' side, they need to strengthen the legal infrastructure to support digitization and engagement in social responsibility activities.