Why might an insurer cover deposits above the insured ceiling at a troubled bank?

1. Deposit insurance normally stops at a stated ceiling for each account. 2. At a troubled bank the insurer may nevertheless cover all deposits, including those above that ceiling. 3. The reason is to restore the confidence of the public in the financial system. 4. Confidence matters because a loss of it makes depositors withdraw from other banks as well. 5. This is a discretionary step, so the option saying the law compels full cover misreads it. 6. Premiums are charged to banks as a percentage of deposits, so no large depositor has bought extra cover. _Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.4 Insuring Bank Deposits_