Tier One capital for a bank as defined under the terms of the Basle Agreement includes all of the following items except one. What item is not included in Tier One capital?

Question

Quizplus · Accepted Answer

Loan-loss reserves are not included in Tier One capital. Tier One capital is primarily composed of core capital elements such as common stock, perpetual preferred stock, and retained earnings, which are considered the most reliable and stable forms of capital that a bank has to absorb losses. Loan-loss reserves, on the other hand, are set aside to cover potential loan losses and are not considered core capital for regulatory purposes.

Tier One Capital for a Bank as Defined Under the Terms