Australian regulator removes CBA’s operational risk capital add-on

The add-on was initially set at $650m.

The Australian Prudential Regulation Authority (APRA) has removed the remaining $325.24m (AU$500m) 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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The Australian regulator initially imposed a $650m (AU$1b) capital add-on on CBA in May 2018 as part of its response to the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (Final Report). 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.

The capital add-on was first halve 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, and APRA undertook validation work to ensure CBA’s remediations were sustainable and well-embedded.