Tier capital
CA-2.2.1
Tier Capital forms the numerator of the Capital Adequacy Ratio. It is defined as the cornerstone of a bank's strength.
CA-2.2.2
The essential characteristics of capital are that it should:
(a) Represent a permanent and unrestricted commitment of funds;(b) Be freely available to absorb losses and thereby enable a bank to keep operating whilst any problems are resolved;(c) Not impose any unavoidable charge on the earnings of the bank.CA-2.2.3
For the purpose of defining Tier capital, the Agency has broadly adopted the recommendations contained in AAOIFI's Statement on the Purpose and Calculation of Capital Adequacy for Islamic Banks. However, some restrictions have been placed on the inclusion of profit equalisation and investment risk reserve as Tier 2 capital. For components of Tier 1 and Tier 2 capital refer to paragraphs CA-2.2.4 to CA-2.2.5.
