Commonwealth Bank of Australia : September Quarter 2021 Basel III Pillar 3

For personal use only

Basel III

Pillar 3

Capital Adequacy and Risk Disclosures as at 30 September 2021

For personal use only	For further information contact:
	Investor Relations
	Melanie Kirk
	Phone:	02 9118 7113
	Email :	[e-mail]

Having been delegated authority by the Board, the release of this announcement was authorised by the Chief Executive Officer, Chief Financial Officer and Chief Risk Officer.

Commonwealth Bank of Australia | Media Release 286/2021 | ACN 123 123 124 | Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000 | 17 November 2021

Contents

	1	Introduction
		Risk Weighted Assets
only	2
	Credit Risk
3
		3.1 Credit Risk Exposures
		3.2 Past Due and Impaired Exposures, Provisions and Reserves
		3.3 Securitisation
For personal use	4	Leverage Ratio
5	Liquidity Risk
	Glossary

2

4

6

6

8

10

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12

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Commonwealth Bank of Australia - Pillar 3 Report

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Introduction

1 Introduction

For personal use only

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 and funds management businesses and certain entities through which securitisation of Group assets is conducted, as illustrated below.

APS 330 reporting structure

Commonwealth

Offshore Branches

and Extended

Bank of Australia

Level 1

Licensed Entities

ASB Bank Ltd (ASB)

CommBank Europe Ltd

(CBE)

PT Bank Commonwealth

Colonial Holding

(PTBC)

Company Ltd and

immediate holding

CBA Europe N.V.

companies

Other Banking Entities

Level 2

Qualifying securitisation

Insurance and Funds

Level 3

vehicles1

Management entities

1 Securitisation that meets APRA's operational requirements for regulatory capital relief under APS 120 Securitisation (APS 120).

The Group is predominantly accredited to use the Advanced Internal-Ratings Based (AIRB) approach for credit risk and Advanced Measurement Approach (AMA) for operational risk. The Group is also required to assess its traded market risk and IRRBB requirement under Pillar 1 of the Basel capital framework.

This document is unaudited, however, it has been prepared consistent with information that has been supplied to APRA. The Group's Pillar 3 documents are available on the Group's corporate website: commbank.com.au/regulatorydisclosures

Capital Position

As at 30 September 2021, the Group's Basel III Common Equity Tier 1 (CET1), Tier 1 and Total Capital ratios as measured on an APRA basis were 12.5%, 15.1% and 19.7% respectively.

The Group's CET1 ratio increased by 19 basis points in the quarter after allowing for the impact of the 2021 final dividend (-79 basis points). This was primarily driven by capital generated from earnings (+47 basis points), partly offset by a net increase in total RWA of $8.7bn ($6.5bn or -19 basis points, excluding the impact of foreign exchange (FX) movements in Credit RWA) and other regulatory adjustments (-9 basis points). Further details on the movements in RWA are provided on pages 4-5.

Subsequent to the current reporting period, in October 2021, the Group completed a $6 billion off-marketbuy-back(-133bpts), resulting in a 30 September 2021 pro-forma CET1 ratio of 11.2%.

The Group's Basel III CET1 ratio was 18.9% on an internationally comparable basis as at 30 September 2021. The CET1 ratio for Level 1 at 30 September 2021 is 12.8%, 30 basis points above Level 2.

2 Commonwealth Bank of Australia - Pillar 3 Report

Introduction (continued)

only

Summary Group Capital Adequacy Ratios (Level 2)

Common Equity Tier 1

Additional Tier 1

Tier 1

Tier 2

Total Capital (APRA)

Common Equity Tier 1 (Internationally Comparable) 1

30 Sep 21	30 Jun 21
%	%

1. 13.1
2. 2.6

15.1	15.7
4.6	4.1
19.7	19.8
18.9	19.4

For personal use

1 Analysis aligns with the 13 July 2015 APRA study titled "International capital comparison study".

Capital Initiatives

The following significant capital initiatives were undertaken during the quarter ended 30 September 2021:

Common Equity Tier 1 Capital

• The Dividend Reinvestment Plan (DRP) in respect of the 2021 final dividend was satisfied in full by the on-market purchase of shares. The participation rate for the DRP was 16.1%.

Tier 2 Capital

The Group issued the following Basel III compliant subordinated notes during the quarter ended 30 September 2021:

• AUD1,500 million and AUD135 million in August 2021; and
• AUD136 million and JPY14 billion in September 2021.

Subsequent to the current reporting period, in October 2021, the Group redeemed AUD1.45 billion CommBank PERLS VIII Capital Notes, a Basel III compliant Additional Tier 1 instrument and a USD750 million Basel III compliant Tier 2 instrument.

APRA's COVID-19 Announcements

COVID-19 Customer Support Measures

The Group continues to extend a number of support measures for customers impacted by COVID-19, which includes loan repayment deferral arrangements and the origination of loans under the Government's Small and Medium (SME) Guarantee Scheme and SME Recovery Loan Scheme.

The Group received guidance from APRA and the RBNZ on the regulatory approach in relation to the implementation of the COVID-19 customer support measures.

• APRA temporary capital relief allowed ADIs to 'stop the clock' on arrears for deferred loans and provide additional relief for restructured loans, to facilitate ADIs in transitioning impacted borrowers to a regular repayment schedule.
• The RBNZ provided similar concessions for repayment deferrals granted in response to COVID-19 up to 31 March 2021.

The Group's original temporary loan deferral programs concluded in March 2021, with the vast majority of customers returning to regular repayments on their loans. The Group has extended new support measures to assist customers further impacted by COVID-19, including loan repayment deferral arrangements, fee waivers and refunds. In response, APRA is providing regulatory relief to assist ADIs in supporting their customers through this period. For eligible borrowers, ADIs will not need to treat the period of deferral as a period of arrears or a loan restructuring. This will apply to loans that are granted a repayment deferral of up to three months before 30 September 2021.

The SME Guarantee Scheme and SME Loan Recovery Scheme were established by the Commonwealth Government to support economic recovery and provide continued assistance to businesses and may be regarded as eligible guarantees by the government for risk weighting purposes. ASB has participated in a similar scheme in New Zealand. The Group will continue to provision for these loans under relevant accounting standards.

Leverage Ratio

The Group's Leverage Ratio, defined as Tier 1 Capital as a percentage of total exposures, was 5.7% at 30 September 2021 on an APRA basis and 6.6% on an internationally comparable basis.

Liquidity Coverage Ratio

The Liquidity Coverage Ratio (LCR) requires Australian ADIs to hold sufficient liquid assets to meet 30 day Net Cash Outflows (NCOs) projected under an APRA prescribed stress scenario. The Group maintained an average LCR of 132% in the September 2021 quarter.

Commonwealth Bank of Australia - Pillar 3 Report

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