What is the advantage of encouraging people/companies to spread their deposits among multiple banks? Say people were really worried about losing anything over the FDIC limit and so kept multiple separate accounts. Then a bank fails and the government still has to cover the deposits, so what's the benefit? Is the idea that if people are worried about their deposits they won't put more than the limit in banks that are making particularly risky investments? Isn't it more likely though that anyone who would do that would just spread their money out regardless, and therefore there's no disincentive to the banks.