Definition of tier two capital

One of the two categories into which a bank's capital is divided, consisting of the less important and central types of capital. [1]

Under capital adequacy regulations meant to ensure banks keep enough money on hand, tier 1 capital is core capital that is relatively transparent and secure (comprising equity capital and disclosed reserves), while tier 2 capital is supplementary capital that is more complex and variable (such as loan loss provisions and subordinated debt). [2]