Hello, I have a question about Basel tier1 tier2 and 3

[Dox Wang]

Hi, anyone knows about this? I found a book said Tier 1>Tier2 + Tier3 capital, but Tier1>=Tier2, Tier3=<250% of Tier1, my confusion is if T1=T2, T3=2.5*T1, how comes Tier 1>T1+2.5T1 ? thanks

 

[ShaktiRathore]

hi
As i infer from above equations,
Tier 1>Tier2 + Tier3..(1) is the strict inequality which should always hold
i think the inequlities Tier1>=Tier2 (2), Tier3=<250% of Tier1 .(3) do not hold in the strictest sense. so that (1) always holds under the condition that Tier1>=Tier2, Tier3=<250% of Tier1. So that we assume that the condition (1) is always true but the conditions 2 and 3 must also hold. But the revere is not true that is 2 and 3 holds that implies that the 1 also holds. So in the end if we assume 2 and 3 to be true than it does not necessarily implies that 1 is also true. But 1 is always true under the condition that 2 and 3 holds and that 2 and 3 does not violate 1.


thanks