APRA cuts CBA’s capital add-on

John Kavanagh

APRA has cut a A$1 billion capital penalty it imposed on Commonwealth Bank by $500 million in response to the bank’s progress in addressing concerns about its governance, accountability and risk culture.

The regulator imposed a “capital add-on” to CBA’s risk capital requirement in 2018 in response to a prudential inquiry into the bank, which criticised its culture and management of non-financial risks.

The bank gave APRA an enforceable undertaking and drew up a remedial action plan.

APRA said: “The latest quarterly report from the independent reviewer indicated that CBA has made significant progress in executing the remedial action plan, although a substantial body of work is needed to ensure the improvements are fully embedded across the whole CBA group.”

The reduction in the add-on is effective immediately, with the remaining $500 million to remain in place until the bank finalises all the matters covered in the plan.

CBA said in a statement that the $500 million cut represents a 17-basis point increase in its common equity tier 1 capital ratio.

CBA chief executive Matt Comyn said in a statement: “We remain committed to achieving these outcomes and to ensuring the improvements to strengthen governance, accountability and risk culture frameworks, practices and outcomes are sustained.”