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The purpose of this paper is to explore the arrangements that have been used in the present crisis and their relative success and to look to the post‐crisis situation.

The paper examines and explains the crisis and the roles of deposit insurance and government guarantees. It deals with coverage, funding, institutional structure, speed of payout, incentives, accountability and, in particular, considers how such systems should function in a world of cross‐border institutions.

The paper suggests how such principles and standards should be set either through International Association of Deposit Insurers or some more efficient means to complement an international approach to financial stability being addressed by the Basel institutions.

There is no widely accepted standard over what the reformed financial system safety net should look like with respect to the protection of deposits and the wider guaranteeing of creditors and other stakeholders. This paper, therefore, makes an attempt to fill that gap.