Bailing out uninsured deposits encourages bank runs

  In the failure of Silicon Valley Bank and Signature Bank, U.S. officials decided to cover all the uninsured deposits in both banks — that is, deposits that exceeded the $250,000 insurance coverage of the FDIC. The belief was that failing to cover those uninsured deposits ran the risk that bank runs could spread to more banks. Covering those uninsured deposits was intended to calm depositors in other banks, which would thereby make more bank runs less likely.