The Commonwealth Bank of Australia (ASX: CBA) share price is in focus after an announcement from APRA regarding the prudential enquiry.
Background information
Back in 2018, CBA entered into an enforceable undertaking (EU) with the Australian Prudential Regulation Authority (APRA).
On 1 May 2018, APRA released its CBA prudential inquiry final report.
Then, at the end of June 2018, CBA’s remedial action plan was approved by APRA.
In November 2020, APRA reduced the operational risk capital overlay imposed on CBA from $1 billion to $500 million in response to “significant progress”. CBA completed its remedial action plan (RAP) on 30 September 2021.
CBA meets its obligations
The major bank said that as a result of it meeting its obligations under the EU, the remaining operational risk capital overlay of $500 million imposed on CBA is released effective 30 September 2022.
This represents an increase in the common equity tier 1 (CET1) capital of 15 basis points. This could be useful for the CBA share price over time.
The independent reviewer, who looked at the final assessments, said:
There is now clear and committed leadership from the top in managing non-financial risk. The shift in CBA’s thinking on customer outcomes was little short of transformative.
There is much clearer and stronger focus on ensuring good customer outcomes and the ‘Should We?’ question has become an integral part of the Group’s everyday conversations.
Challenge is not only a consistent feature of meetings and forums, it is welcomed.
CBA response
The Commonwealth Bank CEO Matt Comyn said:
We are committed to ensuring the improvements we’ve made to our governance, culture and risk management practices are continuously improved and sustained.
Final thoughts on the CBA share price
It’s good to see that CBA has done the work to improve its processes and I think it’s going to be a better bank for it.
While the CBA share price looks better value after dropping 12.5% over the past six months, I’m not sure if it’s great value at today’s price. Plus, there are plenty of other ASX dividend shares that have been sold off a lot more that could be much better value, in my opinion.
