It should have an original maturity of at least two years and will be limited to 250% of the bank's tier 1 capital that is allocated to support market risk.

It is only eligible to cover market risk, including foreign exchange risk and commodities risk.

Insofar as the overall limits in the 1988 Accord are not breached, tier 2 elements may be substituted for tier 3 up to the same limit of 250%.

It is subject to a "lock-in" provision which stipulates that neither interest nor principal may be paid if such payment means that the bank's overall capital would then amount to less than its minimum capital requirement.

In addition, a significant number of member countries are of the opinion that the principle in the present Accord that tier 1 capital calculated on a consolidated basis should represent at least half of total eligible capital should be retained, i.e., the sum total of tier 2 plus tier 3 may not exceed total tier 1. However, the Committee has decided that any decision whether or not to apply such a cap on the use of tier 3 capital should be a matter for national discretion. All countries will continue to maintain the principle that total eligible tier 2 is limited to a maximum of 100% of the total tier 1 elements.

27. In calculating a bank's overall capital ratio, an explicit numerical link between credit and market risk will be created by multiplying the measure of market risk by 12.5 (i.e., the reciprocal of the minimum capital ratio of 8%) and adding the resulting figure to the sum of risk-weighted assets compiled for credit risk purposes. The numerator of the calculation will be the whole of the banks' tier 1 capital, its tier 2 capital under the limits imposed in the 1988 Accord, plus (at national discretion) those tier 3 capital elements which can be used to support market risks. Unused but eligible tier 3 capital may be reported separately.