Economics • Banking & FinanceMedium
Which of the following is considered a 'Tier-2 Capital' component for banks under Basel guidelines?
A. Common Equity Tier 1 capital and retained earnings
B. Disclosed reserves and subordinated debt instruments✓ Correct Answer
C. Customer savings and current account deposits
D. Statutory Liquidity Ratio government securities portfolio
💡 Solution & Explanation
Tier-2 capital under Basel norms represents supplementary bank capital that includes disclosed reserves, revaluation reserves, and subordinated term debt instruments providing a cushion against unexpected losses. Customer deposits belong to liabilities rather than capital components, while Common Equity Tier 1 comprises core equity capital and retained earnings. These capital adequacy frameworks are established by the Basel Committee on Banking Supervision to ensure global financial stability.
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