Financial Awareness - Risk, Stability & Emerging Finance
Which of the following best describes Tier 2 Capital in the context of Capital Adequacy Ratio?
Which of the following best describes Tier 2 Capital in the context of Capital Adequacy Ratio?
medium Q14 of 15
Step-by-Step Solution
Step 1: Understand Tier 2 Capital
Tier 2 Capital is supplementary capital that includes revaluation reserves, hybrid instruments, and subordinated debt.Step 2: Match description
Supplementary capital such as revaluation reserves and hybrid instruments defines Tier 2. Core capital is Tier 1, cash reserves relate to liquidity norms, and NPA provisions cover losses.Final Answer:
Supplementary capital such as revaluation reserves and hybrid instruments → Option CQuick Check:
Tier 2 Capital = supplementary capital including revaluation reserves ✅
Quick Trick: Mnemonic: Tier 1 is Core, Tier 2 is More
Common Mistakes:
- Confusing Tier 2 with cash reserves or provisions
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