The Australian Prudential Regulation Authority (APRA) will reduce the $1 billion capital add-on applied to Commonwealth Bank of Australia (ASX:CBA) by half – that is $500 million, in the wake of the bank’s improvement in addressing apprehensions regarding its governance, liability, risk culture frameworks and practices. The bank’s reputation sank post the scandals in the year 2017.
APRA had to hit the CBA with a $1 billion capital penalty in May 2018 when its prudential enquiry found that more than required emphasis on financial success had dampened the senses of management. This led to an over-confident risk culture.
Meanwhile, the remaining $500 million capital add-on will stay in place until CBA finalises all the matters covered by RAP and addresses all the Final Report recommendations.