What is tier 2 capital?

Banks need required reserves, and one of the important components of these required reserves is tier 2 capital. Tier 2 capital is considered to be less secure than the Tier 1 capital. Tier 2 capital is also known as supplementary capital. It was standardized by the Basel 1 accord and it wasn’t changed during the Basel II accord. You can read about the Capital Adequacy Ratio (CAR) in the given link.

Further readings:

  1. Topic-Wise GS 3 Questions for UPSC Mains
  2. Basel III Norms – Regulations by Basel Committee on Banking Supervision

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