Tier II capital should not be more than . . . . . . . . of Tier I capital.

Solution (By Examveda Team)

Tier I capital is the core capital and represents the strongest financial base of a bank

It includes common equity, retained earnings and disclosed reserves which are fully reliable in absorbing losses

Tier II capital is supplementary capital and is less reliable compared to Tier I

It includes revaluation reserves, subordinated debt etc. which are not as readily available during crisis

Regulators therefore restrict how much Tier II can stand against Tier I

Tier II capital should not exceed 100% of Tier I capital because the banking system must primarily depend on strong core capital rather than supplementary capital

Therefore the correct answer is Option B (100%)