How could you insure a risk so large?
Discussion
It's generally a low risk of bank insolvency though, so in theory it shouldn't be too expensive no?
The problem is that it’s too systemic
Sure, if all banks were actually isolated and used sound money, you could insure against it. But in our economy, all the banks are intertwined and the currency itself is a risk. Once the dominos start falling the cost to insure the banks is way higher than letting them fail, hence why the only people who insure them are governments
It’s not exactly like car insurance where at most a couple cars need to be covered at a time and risk is relatively low and well distributed.