What are the components of tier-1 and tier-2 capital according to Basel accord II.

Posted by Muhammad Jakirul Haque Talukder on Wednesday, May 27, 2015 | 0 comments


Basel II is the second of the Basel Accords, (now extended and partially superseded by Basel III), which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.
Basel II, initially published in June 2004, was intended to amend international standards that controlled how much capital banks need to hold to guard against the financial and operational risks banks face. The components of tier-1 and tier-2 capital according to Basel accord are mentioned follow:

 
Tier-1
(Core capital)
Tier-2
(Supplementary Capital)
Tier-3
( Additional Supplementary Capital)
    1.     Paid up capital.
    2.     Non Repayable share premium.
    3.     Statutory Reserve. 
    4.     General Reserve.
    5.     Retained Earnings.
    6.     Dividend.
    7.     Equalization Account.
    1.     General Provision.
    2.     Assets Revaluation Reserves (up to 50%)
    3.     Revaluation Reserves for Securities (up to 50%)
    4.     Perpetual Subordinate Debt. (up to 30% of tier-1)
    5.     Investment loss offsetting Reserve.
    6.     Exchange Equalization account.
Consisting of short term subordinate debt ( original/ residual maturity less than or equal to five years but greater than or equal to two years.

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