What Are Tier 2 Banks?


Quick Answer

Tier 2 banks are banks that search for technology with vertical integration functions. These banks make up nearly 200 international and national banks, capital markets price takers, and trading volume that averages almost 30,000 transactions every day. Tier 2 banks use analytics to improve risk management and transparency.

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Full Answer

Tier 2 capital is supplementary bank capital, and it includes undisclosed reserves, revaluation reserves, subordinated term debt and hybrid instruments. Tier 2 capital is divided into upper and lower. Perpetual deferrable subordinated debt, coupons that are deferrable and cumulative, and the interest and principal can be written down are elements of Upper Tier 2. Lower Tier 2 is standard and inexpensive for banks to issue, has subordinated debt with maturity of at least 10 years, and has coupons not deferrable without causing default.

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