A category of equity (of an entity, e.g., an Islamic financial institution, IFI) that represents subordinated claims on an entity’s assets after the class of depositors (i.e., accountholders and other participatory investors) and general creditors.
This class of equity may be embedded with a call option that can be exercised by the issuing entity after the passage of a certain period of time (3-5 years ) subject to the condition of replacement by same class with same characteristics.
Tier-2 equity and tier-1 equity, among others, constitute part of an entity’s capital.
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