CBA buffs up on profit day

Credit quality may be looking pretty crisp at Commonwealth Bank, if recent steps to produce higher quality new business echoes down the years.

CBA is responding to APRA and market pressure by producing a serviceability buffer of 2.25 times the required payments. The bank disclosed this data in its June 2015 financial briefing yesterday.

The bank said the serviceability test was "based on the higher of the customer rate plus a 2.25 per cent interest rate buffer or a minimum floor rate."

Better credits warrant less capital, so there are benefits for pushing the boundaries on loan selection criteria.

This will offset some of the requirement for new capital imposed by the Australian Prudential Regulation Authority. Improved serviceability is something APRA wants anyway.

While others may follow and even lead CBA, the fact that one bank is jumping into the better quality credit pool tells you one thing.

There are others lending to crud.