Question
All of the following are considered under Tier II capital of a bank, except ________
Solution
Tier II capital is one of the components of regulatory capital of a bank. It is also known as supplementary capital. Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses arising from a bank's activities. Tier II's capital loss absorption capacity is lower than that of Tier I capital. Tier II capital consists of:
- undisclosed reserves,
- revaluation reserves,
- general provisions and loss reserves,
- hybrid capital instruments (debt capital instruments, perpetual cumulative preference shares/ Redeemable Non-Cumulative Preference Shares / Redeemable Cumulative Preference Shares)
- subordinated debt
- investment reserve account
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