Multiple choice

What is the maximum extent of Tier II capital according to Basel II?

  1. 25% of capital fund

  2. 50% of risk weighted assets

  3. 80% of net worth of the bank

  4. 100% of Tier I capital

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital funds are broadly classified as Tier I and Tier II capital. Elements of Tier II capital will be reckoned as capital funds up to a maximum of 100% of Tier I capital, after making the deductions/adjustments. In other words, Tier II capital cannot exceed Tier I capital.