CA-2.1.8
T2 capital consists of the sum of the following items:
(a) Instruments issued by the conventional bank licensee that meet the criteria for inclusion in T2 outlined in Paragraph CA-2.1.10;
(b) Stock surplus (share premium) resulting from the issue of instruments included in T2;
(c) Instruments issued by consolidated subsidiaries of the conventional bank licensee and held by third parties that meet the criteria for inclusion in T2 capital and are not included in T1. See CA-2.3 for the relevant criteria;
(d) General loan loss provisions held against future, presently unidentified losses and are freely available to meet losses which subsequently materialise and qualify for inclusion within T2. Such general loan loss provisions which are eligible for inclusion in T2 will be limited to a maximum of 1.25 percentage points of credit risk-weighted risk assets. Provisions ascribed to identified deterioration of particular assets or known liabilities, whether individual or grouped, must be excluded;
(e) Regulatory adjustments applied in the calculation of T2 (see CA-2.4); and
(f) Asset revaluation reserves which arise from the revaluation of fixed assets from time to time in line with the change in market values, and are reflected on the face of the balance sheet as a revaluation reserve. Similarly, gains may also arise from revaluation of Investment Properties (real estate). These reserves (including the net gains on investment properties) may be included in T2 capital, with the concurrence of the external auditor, provided that the assets are prudently valued, fully reflecting the possibility of price fluctuation and forced sale.
January 2015