Tier-2 capital (aka gone concern capital or supplementary capital) is a layer of capital (for a bank or financial institution) consisting of items such as revaluation reserves, subordinated debt, hybrid instruments (hybrids/ hybrid capital instruments). Generally, this component of capital includes such sources of capital that do not appear on a bank’s balance sheet.
The components of tier-2 capital are all capital instruments (known as tier-2 capital instruments) meeting the criteria for tier 2 and related surplus, additional eligible minority interest, eligible loan loss provisions and regulatory adjustments.
Tier-2 capital provides an additional source of capital whereby a regulated institution can meet its regulatory requirements in case its core capital (tier-1 capital) falls short of being up to such requirements.
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