See: Tier 1 Capital.
You keep a little wine around the house in case you get a last-minute dinner guest. You've got a bottle of the expensive stuff, reserved for situations when you invite your boss over for an impromptu brain-storming session, or if you've got a first date that's going well. That's tier 1...the good stuff.
Meanwhile, you've also got tier 2. That's the box of wine you've got stuffed in the back of the fridge. It's there in case pizza night gets a little boring. Or for when you plan to binge some Netflix on your own. Not the good stuff, but usually passable.
Banks have a similar distinction with the assets they hold. Tier 1 represents the good stuff. It applies to the holdings that the bank can liquidate most quickly in times of emergency. It's key to ranking the solvency of a financial institution.
Below that, you've got tier 2 capital. It's the less useful stuff. In most markets, it works well. But, in a true emergency, it might cause some problems. The bank might not be able to rely on it for cash. It's useful, but not all the time...only in the right circumstances.
Tier 2 often gets the name "supplementary capital." It includes things like undisclosed reserves and subordinated term debt.
