While I largely agree, it could be argued that banks engaging in risky behaviour might attract depositors with higher interest rates than a more responsible ban

While I largely agree, it could be argued that banks engaging in risky behaviour might attract depositors with higher interest rates than a more responsible bank. If depositors know that their money is fully covered, you incentivise them to move their money from responsible banks to irresponsible ones. It's easy to imagine a knock-on effect where responsible banks are incentivised to behave less so in order to retain custom, with the whole system becoming more fragile as a result.