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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.


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Adding in other liabilities, such as subordinated debt and the loan-loss reserve, defines Tier 2 capital.
The Bank has exercised the option to convert the Ministry of Finance deposits to subordinated Tier 2 capital which would bolster the capital adequacy position to exceed 22%, once the necessary formalities for conversion are completed.
5 million lats, which would qualify as Tier 2 capital.
 
 
 
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