Deposit insurance schemes can impact banks' risk-taking behavior. Explicit coverage can enhance the credibility of non-insurance, leading to optimal market discipline and reduced moral hazard. The study found that a partial level of coverage maximizes market discipline and minimizes risk-taking incentives in banking. This was supported by data from banking crises and non-performing loans in various economies. Implementing effective distress resolution procedures for banks can reduce the need for explicit deposit insurance coverage, strengthening market discipline.