What is 'Tier 3 Capital'

Tier 3 capital is tertiary capital held by banks to meet part of their market risks, that includes a greater variety of debt than tier 1 and tier 2 capitals. Tier 3 capital debts may include a greater number of subordinated issues, undisclosed reserves and general loss reserves compared to tier 2 capital.

BREAKING DOWN 'Tier 3 Capital'

Tier 3 capital is used to support market risk, commodities risk and foreign currency risk. To qualify as tier 3 capital, assets must be limited to 250% of a banks tier 1 capital, be unsecured, subordinated and have a minimum maturity of two years.

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RELATED FAQS
  1. What Is the Difference between Tier 1 Capital and Tier 2 Capital?

    Tier 1 capital is a bank's core capital, whereas tier 2 capital is a bank's supplementary capital. Read Answer >>
  2. How can I calculate the tier 1 capital ratio?

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  3. How can I calculate the leverage ratio using tier 1 capital?

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  4. How do I calculate the capital to risk weight assets ratio for a bank in Excel?

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  5. What percent of capital should banks hold relative to its risk weighted assets?

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