To be honest, if banks were the custodian of my cryptocurrencies, I wouldn't mind because the chances of my crypto being lost is going to go down drastically and if it was in an unlikely event got lost, the banks will have sort of insurance that will be in place to take care of the losses.
In this case, think of centralized exchanges as banks, is your funds totally safe when they are stored in centralized exchanges? Centralized exchanges have and can be hacked and users have lost their funds that way, users data on centralized exchanges have also been leaked to the black market, and through that means they have been robbed either through a $5 wrench attack or any other means.
That's the same thing if banks hold your crypto, and remember "if it's not your keys, it's not your coins". It's also a misconception to think that when a third party is in custody of your coins that it's safe, it's pretty easy to understand Bitcoins security protocols, "be your own bank" and protect yourself. Bitcoin is decentralized, thus if you're not in control of your funds and don't have the freedom to spend it as you deem fit, it thus becomes centralized.
That being said, on the issue of insurance you mentioned, you can't be assured that, quite a lot of centralized exchanges were expected to refund victims of hacks on their exchanges, but they didn't, so what makes you think banks won't do the same.