All of the following are considered under Tier II capital of a bank, except ________

A Revaluation reserves Correct Answer Incorrect Answer
B Subordinate debt Correct Answer Incorrect Answer
C Cumulative Preference capital Correct Answer Incorrect Answer
D Innovative perpetual debt Correct Answer Incorrect Answer
E Undisclosed reserves Correct Answer Incorrect Answer


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
Perpetual Non-cumulative Preference Shares and Innovative Perpetual Debt Instruments (IPDI) are eligible for inclusion as Tier I capital.  

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