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To see why, imagine a bank whose expected future profits, and hence market capitalisation, have slumped. If this erosion of profits is sufficiently material, conversion at the highest trigger occurs. Upon triggering, a chunk of that bank’s debt converts into equity, automatically recapitalising the bank and providing it with an extra equity cushion. This equity infusion ought to help restore market confidence in the bank’s soundness. If the first conversion does not do the trick, or if the profits shock is sufficiently large, there are other rungs in the ladder. Lower triggers provide a graduated safety net. As these triggers are pulled, converting CoCos offer progressively greater stuffing for the cushion. This is a double boon. It confers the benefits of (contractually pre-agreed contingent) equity. But knowledge of the graduated safety net ought also to help stabilise investors’ confidence in the bank. Under this capital structure, banks’ insurance contract would be fundamentally different than at present. Instead of equity being provided at haste under stress, the safety net would extend automatically in advance. And instead of being provided by the state ex post, insurance would come from private creditors ex ante. Timely self-insurance would replace laggardly public insurance. There would be prompt corrective action. But it would operate on autopilot, using a contractual, market-based navigation system. 12  For example, Flannery (2010), Flannery and Perotti (2011), Duffie (2011), Calomiris and Herring (2011). 13  Alternatively, there could be graduated tranches of CoCos operating with a single trigger.