Tier 2 Capital


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Tier 2 Capital

Capital in a bank that is difficult to calculate or liquidate, especially as compared to Tier 1 capital. Under the Basel I Accord, tier 2 capital includes revaluation reserves (or the increase in the value in an asset after it is reappraised), general provisions (or money that the bank has lost but has been unable to calculate), and subordinated debt (or debt that, in the event of default, receives payment only after some other debt). Tier 2 capital is included in calculations of a bank's reserve requirements but is not considered as reliable as Tier 1 capital.
References in periodicals archive ?
The issuance proceeds will be used to boost NBK's Tier 2 capital, as it has been approved as fully eligible Tier 2 Capital by the Central Bank of Kuwait (CBK) under its Basel III framework, and for general and corporate purposes.
Thereafter, we will do tier 2 capital of another $200m.
Combined with Tier 2 capital - which includes undisclosed reserves, general provisions and loan loss reserves, a bank statement said that overall capital adequacy will exceed 17 per cent.
72 billion of the deposits it received into Tier 2 capital.
National Bank of Abu Dhabi (NBAD) has announced that it is planning to convert government bank deposits into Tier 2 capital.
Tier 2 capital is defined as (i) reserves for problem assets [bad debts] that may not exceed 100% of Tier 1 capital; (ii) perpetual preferred stock not qualified to include into Tier 1; (iii) hybrid capital instruments and mandatory convertibles; (iv) subordinated debt; and (v) preferred stock with medium-term remaining current maturity.
Amounts of restricted core capital elements in excess of these limits generally may be included in tier 2 capital, subject to the limit that the aggregate amount of subordinated debt and restricted core capital elements (other than cumulative perpetual preferred securities) included in tier 2 capital may not exceed 50 percent of tier 1 capital.
The NCB transaction follows NCB's issuance of tier 2 capital sukuk in 2014, which is recognised as part of the bank's Basel 3-compliant tier 2 capital resources and was the largest capital markets issuance by a financial institution in Saudi Arabia and the largest subordinated instrument by a financial institution in the MENA region at the time.
Tier 2 capital is supplementary bank capital that comprises such items as, revaluation reserves, undisclosed reserves, hybrid instruments and subordinated term debt.
Emirates NBD's shareholders have already approved the proposed conversion of loans from the ministry of finance into Tier 2 capital.
The rating agency has cut the bank's tier 1 and upper tier 2 capital by two grades.