The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch today after the release of a positive update this morning.
What did CBA announce?
This morning Australia's largest bank revealed that APRA has completed the review into the progress it has made against the Prudential Inquiry Remedial Action Plan and made a decision in relation to the bank's operational risk capital as part of the Enforceable Undertaking.
According to the release, APRA's validation review found that Commonwealth Bank has made significant progress in implementing its Remedial Action Plan.
As a result, the operational risk overlay imposed on the bank has now been reduced from $1 billion to $500 million with immediate effect.
Management notes that this reduction represents an increase in Common Equity Tier 1 capital of 17 basis points.
Commonwealth Bank's Chief Executive Officer, Matt Comyn, said: "We welcome APRA's acknowledgment of the progress we have made over the past two years. At the same time, we and APRA recognise there is still a substantial amount of work to do before our Remedial Action Plan is fully implemented and embedded across CBA."
"We remain committed to achieving these outcomes and to ensuring the improvements to strengthen governance, accountability and risk culture frameworks, practices and outcomes are sustained," he added.
What was the Remedial Action Plan?
In June 2018 the bank revealed its Remedial Action Plan which outlined the steps its board and senior leaders will take to respond to the Prudential Inquiry's 35 recommendations.
This followed an inquiry which identified a number of shortcomings in the bank's governance, culture, and accountability frameworks, particularly in dealing with non-financial risks. This includes a shortcoming related to Anti-Money Laundering and Counter-Terrorism Financing (AML-CTF) matters.
Commonwealth Bank intends to provide its next update on its progress in February 2021.
