It is better not to have deposit insurance

No customer of a bank has the right to receive free deposit insurance from other taxpayers.

If banks are allowed to have deposit insurance there is nothing to prevent them from selling their reserves, we can see that this does not trigger a response from the customers. Consequently (if deposit insurance exists) there is no reason for a customer to care whether the bank is solvent or has suitable reserves.

If customers of a bank are not concerned as to its solvency (and they will not withdraw their deposits) this may lead to the requirement for a monetisation of the excess bank credit, if the bank spends the reserves. If banks are allowed to hold insufficient reserves then monetisation is required for everyone to get their money back. There is no (beneficial) reason for banks to be allowed to hold insufficient reserves, if they have deposit insurance. Since banks have deposit insurance they should be required to keep full reserves, it is wrong that spending the cash reserves is not a crime. Spending money that belongs to other people is a crime (of theft) whether or not we are a bank and it has been deposited with us. When people make a deposit in a bank they are purchasing security services they do not gift to the bank their assets in the expectation that the government will provide (compensating) insurance. The banks have no right to spend the money that has been deposited with them, on the contrary they have a duty and a responsibility to look after it and keep it safe.

But we might argue that ownership of the assets has been transferred in the act of making a deposit...

If someone gives you something to look after and you sell it (for example some food that has been eaten by the banker) no crime has been committed, no aggressive force has been used. An appropriate response is disappointment but nothing more. It is not the fault of the taxpayer that this has happened it is the customer who must normally suffer the consequences, unfortunately. Deposit insurance protects profligate customers from losing out if their banks fail. It is not the fault of my neighbour if I have chosen to use a disreputable bank, but with deposit insurance they will suffer. It is wrong to punish everyone for the mistake of bank customers in trusting an insolvent bank. If everyone used reliable banks there would be no need for deposit insurance.