Commonwealth Bank receives advanced Basel II accreditation
10 December 2007
The Commonwealth Bank is delighted that it today received advanced Basel II accreditation from the Australian Prudential Regulatory Authority (APRA). The accreditation also includes fully owned New Zealand subsidiary, ASB Bank Limited which was separately accredited by the Reserve Bank of New Zealand.
Advanced accreditation under Basel II is a major accomplishment. The work undertaken to achieve this outcome provides the Group with increased sophistication in risk measurement and management thereby significantly increasing flexibility in decision-making and capital management.
From a capital management perspective, advanced accreditation will result in an increase in the Group’s total regulatory capital ratio to in excess of 10 per cent, mainly from a reduction in risk weighted assets. However, the Group does not anticipate any material change in its capital management approach until such time as the full implications of the new arrangements are finalised with APRA and other regulatory authorities.
To facilitate an expanded range of activities in the United States, the Group is considering applying for Financial Holding Company (FHC) status. As part of the requirements for FHC status, the Group will need to maintain a minimum tier 1 capital ratio of 6 per cent and a total capital ratio of 10 per cent.
Commenting on the APRA decision, Commonwealth Bank of Australia Chief Financial Officer David Craig said, "We are very pleased to have achieved advanced Basel II accreditation. While much of the focus today will be on the impact that this decision has on our capital position, it needs to be remembered that this outcome, which is the culmination of many years of hard work, has delivered, and will continue to deliver significant operational and financial benefits to the Group. I would like to thank all of our people who have worked so hard to deliver this important outcome."
Full details of the Group’s capital position under Basel II will be disclosed at the time of its interim profit announcement on 13 February 2008.