The Australian Prudential Regulation Authority’s probe into CBA’s anti-money laundering failures could trigger a ratings downgrade, S&P Global has warned.
The ratings agency said this week that while its ratings for CBA currently remain unchanged (AA- with a negative outlook), a ratings downgrade could be on the cards if APRA’s inquiry has “adverse findings”.
The prudential regulator announced yesterday (28 August) that it would conduct an inquiry into CBA that would aim to identify shortcomings in governance, culture and accountability frameworks and processes.
Responding to the announcement, S&P Global said: “We consider that the bank's credit profile is likely to weaken if there were any material adverse findings by this inquiry or any financial penalties, potential material damage to the bank's reputation and franchise, or any indications of weaknesses in its governance and risk management framework.
“These pressures on the ratings on CBA are in addition to those incorporated in the negative outlook on CBA and other major Australian banks reflecting our view of a potential reduction in the Australian government's support for the systemically important banks.”
S&P also noted that APRA’s “timely approach” taken in addressing the anti-money laundering scandal was “commensurate with our views around the low risk institutional framework for the Australian banking system”.
Further, the agency held that the inquiry would be valuable in identifying shortcomings and potential remedial actions, warning: “We consider that erosion in confidence of the major stakeholders in the bank's corporate governance processes would likely also weaken its credit profile.”
[Related: APRA to conduct inquiry into CBA]