Governments face conflicting objectives in terms of the provision and design of safety nets for banking systems. Safety nets may reduce market discipline and can thus increase the likelihood of a banking crisis. But safety nets are adopted because of the perceived benefits they will confer in either preventing a weak banking system from spilling over into a full-blown crisis or in enabling the government to handle a crisis more effectively. This paper provides evidence on the effects of government safety nets on both these aspects and discusses implications for policy.