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The prudential regulator has given the major bank the all clear and removed the final capital charge after its conduct failings were remediated.
The Australian Prudential Regulation Authority (APRA) has removed the remaining $500 million capital add-on applied to Commonwealth Bank Australia (CBA) to address previous weaknesses in its governance, accountability and risk culture frameworks and practices.
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APRA said it would reduce the charge to zero after having imposed that the bank hold an additional $1 billion as a consequence of its conduct failings.
APRA imposed the capital penalty on the bank (May 2018) after launching an inquiry into the Commonwealth Bank after high-profile conduct failings were reported that led up to the establishment of a royal commission into the sector.
On 20 November 2020, APRA reduced the operational risk capital overlay imposed from $1 billion to $500 million in response to significant progress.
The inquiry, which followed a series of incidents that damaged the bank’s public standing, concluded that “CBA’s continued financial success dulled the senses of the institution”, particularly in relation to the management of non-financial risks.
An extensive remediation plan was established to address the identified shortcomings, which was completed on 30 September 2021.
The capital add-on was reduced to $500 million in November 2020 in recognition of CBA’s progress in addressing these issues.
APRA indicated at that time that the remainder would stay in place until CBA completed its full program of remediation, including addressing all recommendations from the final report.
Following validation work to ensure CBA’s remediations were sustainable and well embedded, APRA removed the remaining capital add-on, effective 30 September.
As a result of CBA meeting its obligations, chief executive Matt Comyn said the bank was committed to ensuring the improvements to its governance, culture and risk management practices are “continuously improved and sustained”.
An independent reviewer said there was “clear and committed leadership” from the top in managing non-financial risk and that the “shift in CBA’s thinking on customer outcomes was little short of transformative”.
“There is much clearer and stronger focus on ensuring good customer outcomes and the ‘Should We?’ question has become an integral part of the Group’s everyday conversations,” the review said.
[Related: Breaches against CBA conflicted remuneration dismissed]
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