What is Tier 2 Capital?

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What is Tier 2 Capital?

Tier 2 Capital consists of lower quality or less reliable capital reserves when compared to that within Tier 1 – and as such these items are considered less effective at absorbing any losses by a firm.

These supplementary funds include such items as:

• Paid up capital instruments
• Subordinated loans
• Revaluation reserves
• Undisclosed reserves
• Hybrid instruments
• Amortization