This paper examines the impact of deposit insurance on banking system stability, using a comprehensive dataset of 61 countries over the period 1980-1997. The authors find that explicit deposit insurance tends to increase bank fragility, particularly in countries with weak regulatory environments and where bank interest rates have been deregulated. The study also explores the effects of different design features of deposit insurance systems, such as coverage limits, funding sources, and management structures. It is found that more extensive coverage, funded schemes, and government-managed systems are associated with higher moral hazard and increased bank fragility. The paper further investigates the role of institutional quality in mitigating the negative effects of deposit insurance, suggesting that strong institutions can help reduce the adverse impact on banking stability. Finally, the authors discuss the implications of their findings for policy makers and the potential benefits of deposit insurance in certain types of countries.This paper examines the impact of deposit insurance on banking system stability, using a comprehensive dataset of 61 countries over the period 1980-1997. The authors find that explicit deposit insurance tends to increase bank fragility, particularly in countries with weak regulatory environments and where bank interest rates have been deregulated. The study also explores the effects of different design features of deposit insurance systems, such as coverage limits, funding sources, and management structures. It is found that more extensive coverage, funded schemes, and government-managed systems are associated with higher moral hazard and increased bank fragility. The paper further investigates the role of institutional quality in mitigating the negative effects of deposit insurance, suggesting that strong institutions can help reduce the adverse impact on banking stability. Finally, the authors discuss the implications of their findings for policy makers and the potential benefits of deposit insurance in certain types of countries.