Tier 2 Capital

A bank’s Tier 2 capital is its going-concern capital. This is the capital that absorbs losses once a bank has failed – and before depositors and general creditors. Regulatory Tier 2 capital instruments can include dated subordinated debt and subordinated loans and related share premium accounts. A bank’s total regulatory capital is the sum of its Tier 1 capital (cf.) and its Tier 2 capital.