Abstract: All modern economies benefit from efficient, stable and fair financial markets. In Ethiopia, although it is still emerging, the banking sector makes a vital contribution to the rest of businesses and households to finance investment and savers to manage their finances over their lifetime. In times of unstable markets, on the other hand, one of the biggest concerns for depositors is the safety of bank deposits should there bank fail. In times of rainy days almost all states devised rules which provide a safety net for depositors if banks fail. In this regard, the primary purpose of states is to give priority to maintain and restore confidence and proper functioning of the financial sector.