APRA will halve the $1 billion capital add-on it required of CBA after the prudential inquiry, reporting the bank has progressed on addressing concerns around its governance, accountability and risk culture practices.
The $500 million reduction to the operational risk capital add-on came into effect from Friday.
APRA had imposed the capital add-on on CBA in May 2018, as part of its response to the final report of the prudential inquiry into the bank.
The inquiry, which followed a series of incidents that damaged the bank’s public standing, concluded that “CBA’s continued financial success dulled the sense of the institution”, particularly in relation to the management of non-financial risks.
At the time, CBA gave APRA an enforceable undertaking, which committed to addressing the findings detailed in the final report and APRA imposed a $1 billion add-on to CBA’s operational risk capital requirement.
Under the terms of the enforceable undertaking, a remedial action plan (RAP) was provided to APRA for approval and CBA appointed an independent reviewer to report quarterly on its progress.
APRA reported the latest quarterly report indicated CBA has made “significant progress”, alongside further work from the regulator.
The bank has made changes across areas such as risk management and compliance, remuneration and risk culture – but, APRA said a “substantial body of work is needed” still, to ensure the improvements are fully embedded across the whole group.
The remaining $500 million capital add-on will remain in place until APRA is satisfied CBA has finalised all of the matters covered by its remedial action plan and the final report recommendations.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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