A banking licence enables banks to cause inflation; it protects the institution from true insolvency. A bank run is prevented (they would go bust without the insurance) which means they they will continue to be able to issue credit at a high price.
Bank credit (deposits) are valuable only because of the deposit guarantee. Remove the guarantee and there would be a collapse of the banking sector. Banking relies on the deposit guarantee, without it there would be no inflation caused by lending from banks.
Perhaps we should just let the banks collapse? A Capitalist system would be allowed to collapse.
Banks cause inflation when they loan money, this is because the deposits remain in circulation, affecting prices. Normally, a loan would not influence prices. Aside from the inflation, the economic purchasing power of the lender (the depositor) is not altered. Loans outside the banking sector do not influence prices.
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