There is no need to guarantee the banking sector

Deposit insurance means that banks (if they are guaranteed) cannot fail... this is a problem not only for people who hold cash but for everyone because banks and their customers can acquire all the assets. If fiat currency is used (which by definition is true otherwise deposit insurance is meaningless) then to guarantee the banks means they can print money and get rich. If they are insured the banks can acquire all the assets... which is not good. It's not good if only banks can buy things. It's good if everyone (including non-banks) can buy things.