📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      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

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

      Practice Next
      More Financial Management Questions

      Relevant for Exams:

      ask-question