First, in the absence of a debt market, the banking system would be larger than it otherwise would be. Prevalence of a domestic debt market can move a crisis outside the banking system making it easier for the Government to stand back.
As Alan Greenspan has argued, coexistence of domestic bond market and banking system helps each to act as a backstop for the other. In the past, countries like Japan have developed with almost total reliance on bank intermediation but the risks of such excessive reliance are more in a relatively open economy since non-bank intermediation may get located outside the country.