BANK 3.2.18 Criteria for third party interests — tier 2 capital

(1) For rule 3.2.12 (c), an instrument (including a common share and any other tier 1 capital instrument) issued by a consolidated subsidiary of a banking business firm and held by a third party as a non-controlling interest may be included in the firm's tier 2 capital if the instrument would be included in the firm's tier 2 capital had it been issued by the firm.

Note Any amount already included in CET 1 capital or additional tier 1 capital must not be included in tier 2 capital — see rule 3.2.12 (c).
(2) The amount to be included in the consolidated tier 2 capital of a banking business firm is calculated in accordance with the following formula:

NCI((T2sMin) × SS)

where:

NCI is the total of the non-controlling interests of third parties in a consolidated subsidiary of the firm.

T2s is the amount of tier 2 capital of the subsidiary.

Min is the lower of:

(a) 1.07 × (minimum tier 2 capital requirement of the subsidiary); and
(b) 1.07 × (the part of the consolidated minimum tier 2 capital requirement that relates to the subsidiary).
SS means the percentage of the shares in the subsidiary (being shares included in tier 2 capital) held by those third parties.
Derived from QFCRA RM/2014-2 (as from 1st January 2015).