The fact that deposits are insured has nothing to do with bank solvency. People just get some of the money back when the bank blows up. Arguably this makes bank

The fact that deposits are insured has nothing to do with bank solvency. People just get some of the money back when the bank blows up. Arguably this makes banks to be even more reckless and to hide more dangerous risks under the deposit insurance claims. And the function of the regulator is to stop and DISSOLVE the bank BEFORE it goes potentially too deep into the pocket of deposit insurance fund in case of running astray. So this is a social instrument but again does not solve the institutional risk problem. Maybe, just maybe makes some banks more paranoid, but they still blow up at very high pace.