Should there be a financial crisis, it pays insurance benefits to the bank from the lock box. The bank can use those funds to increase its capital. If the policy term elapses without a financial crisis, the liability reserves in the lock box return to the investor. This is the basic idea behind capital insurance. What sorts of banks are envisioned as the insured?
Professor Kashyap and other advocates of private sector capital insurance say that it should be open to all financial institutions subject to the Basel Accord (BIS rules).