We also find that higher quality of institutions lowers lending borrowing spreads, thus contributing to eroding sources of market power in the banking sector. In our estimations, higher quality of institutions reduces both lending and deposit rates, although the impact is stronger on the former. The paper is organized as follows. In Section 2, we describe the main features of an explicit scheme of deposit insurance. In Section 3, we review the theoretical and empirical literature on deposit insurance and we discuss how this instrument can contribute to reach the targets of systemic stability and.
