Content Detail

• Content META

  Title	Commonwealth Bank of Australia : Basel III Pillar 3 – capital adequacy and risk disclosures as at 31 December 2024
  ID	6798226
  External ID	7542887900
  Author	Unknown
  Published Date	Feb. 11, 2025, 4:18 p.m.
  Summary	Capital Adequacy and Risk Disclosures as at 31 December 2024 Commonwealth Bank of Australia For further information contact: Investor Relations Melanie Kirk Phone: 02 9118 7113 Email: cbain
  Tags	None
  URL	https://www.marketscreener.com/quote/stock/commonwealth-bank-of-aust-6492243/news/commonwealth-bank-of-australia-basel-iii-pillar-3-capital-adequacy-and-risk-disclosures-as-at-49026051/
  Sentiment	Negative: 0.02508    Neutral: 0.95100    Positive: 0.02392
  Relevance	0.01333

• Content Details

  Content ID	4227946
  Key	7077a478-061c-4c8a-b16a-d0ddc81bf2a8
  Content	Capital Adequacy and Risk Disclosures as at 31 December 2024 Commonwealth Bank of Australia For further information contact: Investor Relations Melanie Kirk Phone: 02 9118 7113 Email: cbainvestorrelations@cba.com.au The release of this announcement was authorised by the Board. Commonwealth Bank of Australia | Media Release 006/2025 | ACN 123 123 124 | Commonwealth Bank Place South Level 1, 11 Harbour Street, Sydney NSW 2000 | 12 February 2025 Contents 1 Introduction The Commonwealth Bank of Australia (CBA) is an Authorised Deposit-taking Institution (ADI) regulated by the Australian Prudential Regulation Authority (APRA) under the authority of the Banking Act 1959. This document is prepared for CBA and its subsidiaries (the Group) in accordance with a Board approved policy and quarterly reporting requirements set out in APRA Prudential Standard (APS) APS 330 Public Disclosure (APS 330). It presents information on the Group's capital adequacy and Risk Weighted Assets (RWA) calculations for credit risk including securitisation, traded market risk, Interest Rate Risk in the Banking Book (IRRBB) and operational risk. This document also presents information on the Group's leverage and liquidity ratios in accordance with prescribed methodologies. The Group is required to report its assessment of capital adequacy on a Level 2 basis. Level 2 is defined as the Consolidated Banking Group excluding the insurance entity and certain entities through which securitisation of the Group's assets is conducted. The Group is predominantly accredited to use the Advanced Internal-Ratings Based (AIRB) approach for credit risk and the Standardised Measurement Approach for operational risk. The Group is also required to assess its traded market risk and IRRBB requirements under Pillar 1 of the Basel capital framework. This document is unaudited and has been prepared consistent with information that has been supplied to APRA. This Pillar 3 document is available on the Group's corporate website: Commbank.com.au/regulatorydisclosures The Group in Review Group Capital Ratios As at 31 December 2024, the Group's Basel III Common Equity Tier 1 (CET1), Tier 1 and Total Capital ratios were 12.2%, 14.1% and 20.7% respectively. Leverage Ratio The Group's leverage ratio, which is defined as Tier 1 Capital as a percentage of total exposures, was 4.9% as at 31 December 2024. Liquidity Coverage Ratio The Liquidity Coverage Ratio (LCR) requires Australian ADIs to hold sufficient liquid assets to meet 30 day Net Cash Outflows (NCO) projected under an APRA prescribed severe liquidity stress scenario. The Group maintained an average LCR of 127% in the December 2024 quarter. Net Stable Funding Ratio The Net Stable Funding Ratio (NSFR) is the ratio of the amount of Available Stable Funding (ASF) to the amount of Required Stable Funding (RSF) over a one year horizon. Factors prescribed by APRA are used to determine the stable funding requirement of assets and the stability of alternative sources of funding. The Group's NSFR was 116% at 31 December 2024. Policy Framework The Group regularly benchmarks and aligns its policy framework against existing prudential and regulatory standards. Potential developments in Australian and international standards, and global best practice are also considered. The Group continues to monitor and take actions to enhance and strengthen its risk culture. The Group has a formal Risk Management Approach (RMA) that creates clear obligations and transparency over risk management and strategy decisions. A risk accountability model (Three Lines of Accountability) requires business management to operate responsibly by taking well understood and managed risks that are appropriately and adequately priced. The application is reflected in the Group's overall asset quality and capital position. In particular, the Group remains in a small group of banking institutions with an AA-/Aa2 credit rating. To maintain this strength, the Group continues to invest in its risk systems and management processes. The Group's capital forecasting process and capital plans are in place to ensure a sufficient capital buffer above minimum levels is maintained at all times. The Group manages its capital by regularly and simultaneously considering regulatory capital requirements, rating agency views on the capital required to maintain the Group's credit rating, the market response to capital levels and stress testing. These views then cascade into consideration of the target capital level. The Group's management of its capital adequacy is supported by robust capital management processes applied in each Business Unit (BU). The results are integrated into the Group's risk-adjusted performance and pricing processes. Commonwealth Bank of Australia - Pillar 3 Report 2 Scope of Application This document has been prepared in accordance with the Board approved policy and reporting requirements set out in APS 330. APRA adopts a tiered approach to the measurement of an ADI's capital adequacy: Level 1 : the Parent Bank (CBA) and offshore branches (the Bank) and APRA approved Extended Licensed Entities (ELE); Level 2 : the Consolidated Banking Group excluding an insurance entity and certain entities through which securitisation of Group assets is conducted; and Level 3 : the conglomerate group including the Group's insurance entity (the Group). The Group is required to report its assessment of capital adequacy on a Level 2 basis. The head of the Level 2 Group is the Parent Bank. Additional disclosure of capital ratios relating to material ADIs within the Group together with CBA's own Level 1 Capital ratios are included under Table 6g of this report (page 7). ASB Bank Limited (ASB) operates under Advanced Basel III status and is subject to regulation by the Reserve Bank of New Zealand (RBNZ). The RBNZ applies a similar methodology to APRA in calculating regulatory capital requirements. CBA Europe N.V. applies the Standardised Basel III methodology in calculating their local regulatory capital requirements. Effective from March 2022, APRA approved CBA Europe N.V. to apply the Internal Ratings-based (IRB) approach for the purpose of determining the Group's capital requirement at Level 2. Restrictions on transfer of funds or regulatory capital within the Group The transfer of regulatory capital and funding within the Group is subject to restrictions imposed by local regulatory requirements. In particular, APS 222 Associations with Related Entities establishes prudential limits on the level of exposure that the Bank may have to a related entity. The Bank and all of the subsidiaries of the Group are adequately capitalised. There are no restrictions or other major impediments on the transfer of funds within the Group. There are no capital deficiencies in non-consolidated (regulatory) subsidiaries in the Group. APS 330 reporting structure A detailed list of non-consolidated entities is provided in Appendix 11.5. Securitisation that meets APRA's operational requirements for regulatory capital relief under APS 120 Securitisation (APS 120). 3 Capital Capital Adequacy The Group actively manages its capital to balance the perspectives of various stakeholders (regulators, rating agencies and shareholders). This is achieved by optimising the mix of capital, while maintaining adequate capital ratios throughout the financial year. The Group's capital is managed within a formal framework, the ICAAP, which is an integration of risk, financial and capital management processes. APRA advises the Group of its Prudential Capital Requirement (PCR), which represents the regulatory minimum CET1, Tier 1 and Total Capital ratios that the Group is required to maintain at all times. In order to ensure there is no breach of these minimum levels, APRA expects the Group to maintain a prudent buffer over these prescribed minimum levels. The PCR is subject to an ongoing review by APRA and is formally reassessed on an annual basis. The Group is required to inform APRA immediately of any breach or potential breach of its PCR, including details of remedial action taken or planned to be taken. The Group has a range of instruments and methodologies available to effectively manage capital. These include share issues and buybacks, dividend and Dividend Reinvestment Plan (DRP) policies, hybrid capital raising and subordinated debt issuances. All major capital related initiatives require approval by the Board. The Group's capital position is monitored on a continuous basis and reported monthly to the Executive Leadership Team of the Group and at regular intervals throughout the year to the Board Risk and Compliance Committee. Capital forecasts are updated on a continuous basis and a detailed capital plan is presented to the Board annually. Capital - CET1 (APRA) Due to rounding, numbers presented in this section may not sum precisely to the totals provided. The 2024 final dividend included the on-market purchase of $758 million of shares (CET1 impact of -16bpts) in respect of the Dividend Reinvestment Plan. 3 Excludes equity accounted profits/losses and impairments from associates as they are capital neutral with offsetting changes in capital deductions. 4 Excludes impact of foreign exchange movements which is included in 'Other'. 5 Includes the benefit from the partial divestment of CBA's shareholding in Vietnam International Commercial Joint Stock Bank (VIB), increase in capitalised software, impact of revaluation losses on the HQLA portfolio, FX impact on Credit RWA, equity accounted profits/losses from associates, other regulatory adjustments and progress on the on-market share buy-back. As at 31 December 2024, the Group has completed $300 million of the $1 billion on-market share buy-back previously announced on 9 August 2023 (2,706,964 ordinary shares bought back at an average price of $110.72). $18 million of this was completed in 1H25 (118,000 ordinary shares bought back at an average price of $151.98). Capital Position The Group's CET1 Capital ratio was 12.2% as at 31 December 2024, compared with 12.3% as at 30 June 2024. The CET1 Capital ratio was well above APRA's regulatory requirement at all times throughout the half year ended 31 December 2024. Key drivers of the change in CET1 for the 6 months ended 31 December 2024 were: The payment of the 2H24 dividend; Higher total RWA with increases in Credit Risk and Operational Risk RWA, partly offset by lower IRRBB and Traded Market Risk RWA; partly offset by Capital generated from earnings; and Other regulatory adjustments and movement in reserves. Further details on the movements in RWA are provided on pages 9-11. Commonwealth Bank of Australia - Pillar 3 Report Capital (continued) Capital Initiatives The following significant capital initiatives were undertaken during the half year ended 31 December 2024: Common Equity Tier 1 Capital The Dividend Reinvestment Plan (DRP) in respect of the 2024 final dividend was satisfied in full by the on-market purchase of shares. The participation rate for the DRP was 18.1%. Tier 2 Capital The Group issued AUD1,500 million subordinated notes in November 2024 and redeemed EUR1,000 million subordinated notes in October 2024, both Basel III compliant Tier 2 Capital. Regulatory Framework The APRA prudential standards prescribe a minimum CET1 Capital ratio of 10.25% for Internal Ratings-based (IRB) ADIs such as CBA, comprising of a minimum Prudential Capital Requirement (PCR) of 4.5% and a capital conservation buffer (CCB) of 5.75%, which includes a Domestic Systemically Important Bank (D-SIB) buffer of 1% and a baseline countercyclical capital buffer (CCyB) set at 1% . The CCyB, which may be varied by APRA in the range of 0%-3.5%, can be released in times of systemic stress and post-stress recovery. The Group expects to operate with a post-dividend CET1 Capital ratio of greater than 11%, compared to the APRA minimum of 10.25%, except in circumstances of unexpected capital volatility. The minimum Tier 1 Capital requirement as at 31 December 2024 was 11.75%. To satisfy APRA's loss-absorbing capacity requirements, the minimum Total Capital ratio requirement for D-SIBs, including CBA, has increased from 13.75% to 16.75% effective from 1 January 2024. From 1 January 2026, the requirement will increase to 18.25%. Regulatory Developments IRRBB Consultation On 8 July 2024, APRA released the final revised APS 117 "Capital Adequacy: Interest Rate Risk in the Banking Book", which sets out the requirements that an ADI must meet in managing its Interest Rate Risk in the Banking Book (IRRBB), following the November 2022 and December 2023 consultations on proposed changes to the standard. The revised APS117 will come into effect on 1 October 2025. Traded Market Risk and Counterparty Credit Risk APRA is yet to commence consultation on revisions to APS 116 "Capital Adequacy: Market Risk", and APS 180 "Capital Adequacy: Counterparty Credit Risk", with revisions to both standards expected to be implemented in 2026. In November 2024, APRA announced that the CCyB for Australian exposures will remain at 1%. The Group has limited exposures to offshore jurisdictions in which a CCyB requirement in excess of 0% has been imposed. New Zealand bank capital adequacy requirements The Reserve Bank of New Zealand's revisions to bank capital adequacy requirements are being implemented in stages during a transition period from October 2021 to July 2028. By the end of the transition period, the minimum Tier 1 and Total Capital requirements for banks deemed systemically important, including ASB, will increase to 16% and 18% of RWA respectively, of which 13.5% must be in the form of CET1 Capital while Tier 2 Capital can contribute up to a maximum of 2% of the Total Capital requirement. As at 31 December 2024, the CET1, Tier 1 and Total Capital ratio requirements for ASB were 9%, 11.5% and 13.5%, respectively. APRA Additional Tier 1 ("AT1") Capital Discussion Papers On 10 September 2024, APRA released a second discussion paper entitled "A more effective capital framework for a crisis" proposing to simplify the capital framework by phasing out AT1 instruments and replacing it with CET1 and Tier 2 Capital. This follows the initial discussion paper entitled "Enhancing bank resilience: Additional Tier 1 Capital in Australia" on potential policy options to improve the effectiveness of AT1 instruments in a potential bank stress scenario. Subsequently, on 9 December 2024, APRA released a letter entitled "A more effective capital framework for a crisis: Update" confirming that it is proceeding with its proposal to phase out AT1 Capital from the capital framework. Large, internationally active banks such as CBA, will be able to replace the current 1.5% of AT1 Capital with 0.25% of CET1 Capital and 1.25% of Tier 2 Capital. Total Capital requirement is to remain unchanged. These changes will commence from 1 January 2027. In addition, existing AT1 instruments will be eligible to be included as Tier 2 Capital from this date until their first scheduled call date. APRA intends to formally consult on any proposed amendments to the prudential framework by mid-2025, with expected finalisation by late-2025. Prudential framework for groups On 24 October 2022, APRA released a letter to all APRA regulated entities indicating that it is reviewing the prudential framework for groups operating in the Australian banking sector to ensure it caters for the increasing array of new groups and it is consistently applied across different structures. APRA is yet to formally consult on any revisions to the relevant standards. Targeted changes to ADI liquidity and capital standards On 24 July 2024, APRA finalised its targeted revisions to ADIs' liquidity and capital requirements following the November 2023 consultation, which aims to ensure ADIs have strong crisis preparedness, prudently value their liquid assets and minimise potential contagion risks. The changes will come into effect on 1 July 2025. Public disclosure In December 2022, APRA issued a revised APS 330 "Public Disclosure", which aligns with the updated international standards for public disclosure set by the BCBS. The revised disclosure requirements are effective from 1 January 2025. Capital (continued) Group Regulatory Capital Position Further details on the composition of the Group's capital are detailed in Appendix 11.1. Commonwealth Bank of Australia - Pillar 3 Report Capital (continued) Group Regulatory Capital Position (continued) Table 6g - Capital Ratios - Level 1 and Major Subsidiaries Calculated in accordance with the RBNZ Prudential Requirements. Calculated in accordance with the RBNZ Prudential Requirements. 4 Leverage Ratio The Group's leverage ratio, defined as Tier 1 Capital as a percentage of total exposures, was 4.9% as at 31 December 2024. The ratio reduced by 10 basis points on the prior half with an increase in exposures and payment of the 2H24 dividend, partly offset by capital generated from earnings. The minimum leverage ratio requirement for IRB banks, such as CBA, is 3.5%. Refer to Appendix 11.2 for further details on the composition of the leverage ratio. Total exposures is the sum of on balance sheet exposures, derivatives, securities financing transactions (SFTs), and off balance sheet exposures, net of any Tier 1 regulatory deductions, as outlined in APS 110 Capital Adequacy (APS 110). Refer to Appendix 11.2 for the calculation of the 31 December 2024 exposures. Commonwealth Bank of Australia - Pillar 3 Report Attachments Original document Permalink Disclaimer Commonwealth Bank of Australia published this content on February 11, 2025 , and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 11, 2025 at
  Content Reference URL	None

• Publisher

  Publisher Name	MarketScreener
  Publisher URL	http://www.marketscreener.com
  Description	None
  Trust Flow Score	23
  Citation Flow Score	26

• Data Source

  Data Source Name	Quantexa News
  Data Source Type	news
  Data Source URL	https://app.aylien.com/dashboard
  Description	Welcome to Quantexa News API — the most powerful way to aggregate, filter, and integrate global news data into your apps and models.
  Weight	10