What is included in Tier 2 capital?

Tier 2 capital consists of an investment reserve account, subordinated debt, hybrid capital instruments, loss reserves, revaluation reserves, undisclosed reserves and general provisions.You can read about the Basel III Norms – Regulations by the Basel Committee on Banking Supervision in the given link.

Tier 2 capital was standardized by the Basel I accord. Tier 2 capital is also known as the supplementary capital. Banks have to keep part of their required reserves, and this second layer of capital is known as the Tier 2 capital.

Further readings:

  1. Topic-Wise GS 3 Questions for UPSC Mains
  2. Capital Adequacy Ratio (CAR)

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