A component of surplus reserve, which is, in turn, a component of tier-1 capital (core capital, or tranche-1). Statutory surplus reserve can be used to offset previous years’ losses, if any, or to expand the a bank’s operations, and may be converted into share capital by the issuance of new shares to existing shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, subject to a specific balance (percentage) after such issue relative to the registered capital (balance is not less than 25%).