The article examines how deposit guarantees affect banks' loan decisions. Deposit guarantees can lead to inefficient investments by banks, which may increase asset risk. This risk can reduce the benefits of having more capital in banks, making it harder to predict defaults and impacting the efficiency of lending. In some cases, stricter capital requirements can actually raise the chances of default and financial instability. Simply increasing bank capital is not enough to control risks; active monitoring and control are still necessary to ensure stability in the financial system.