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Basel III Pillar 3

Capital Adequacy and Risk Disclosures as at 31 December 2020

For further information contact:

Investor Relations

Melanie Kirk Phone: 02 9118 7113 Email : [email protected]

The release of this announcement was authorised by Kristy Huxtable, Company Secretary.

Commonwealth Bank of Australia | Media Release 18/2021 | ACN 123 123 124 | Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000 | 10 February 2021

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Commonwealth Bank of Australia – Pillar 3 Report 1

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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 APRA Prudential Standard 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 and countercyclical capital buffer (CCyB) 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 general insurance and funds management businesses and entities through which securitisation of Group assets is conducted.

The Group is predominantly accredited to use the Advanced Internal Ratings-based (AIRB) approach for credit risk and the 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. PwC have provided recommendations to enhance the internal controls related to the calculation of RWA and the Group has an action plan in place to implement these recommendations.

This Pillar 3 document is available on the Group’s corporate website: Commbank.com.au/regulatorydisclosures.

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	31 Dec 20	30 Jun 20	31 Dec 19
Summary Group Capital Adequacy Ratios(Level 2)	%	%	%
Common Equity Tier 1	12. 6	11. 6	11. 7
Tier 1	15. 0	13. 9	14. 1
Tier 2	3. 9	3. 6	3. 3
Total Capital(APRA)	18. 9	17. 5	17. 4
Common Equity Tier 1(Internationally Comparable) 1	18. 7	17. 4	17. 5

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

Group Capital Ratios

As at 31 December 2020, the Group’s Basel III Common Equity Tier 1 (CET1), Tier 1 and Total Capital ratios as measured on an APRA basis were 12.6%, 15.0% and 18.9% respectively. The Basel III CET1 ratio was 18.7% on an internationally comparable basis as at 31 December 2020.

Leverage Ratio

The Group’s leverage ratio, which is defined as Tier 1 Capital as a percentage of total exposures, was 6.0% at 31 December 2020 on an APRA basis and 6.8% 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 143% in the December 2020 quarter.

On 19 March 2020, the Reserve Bank of Australia (RBA) announced the establishment of a three year Term Funding Facility (TFF) offered to eligible ADIs to support lending to Australian businesses. As at 31 December 2020, the Group had a total TFF allocation of $41.0 billion, with its Initial Allowance of $19.1 billion fully drawn, and its Supplementary Allowance of $13.0 billion and Additional Allowance of $8.9 billion undrawn. As at 1 February 2021, the Group’s total available TFF allocation was $40.9 billion.

Net Stable Funding Ratio

The Net Stable Funding Ratio (NSFR) is the ratio of the amount of Available Stable Funding (ASF) to the amount of Required Stable Funding (RSF). Factors prescribed by APRA are used to determine the stable funding requirement of assets and the stability of alternative sources of funding. The Group’s NSFR was 123% at 31 December 2020.

COVID-19 Impacts

The Group has introduced a number of measures to support customers impacted by COVID-19. Further details of these measures are provided on page 12.

APRA made several announcements in response to the economic environment resulting from COVID-19. Further details of the temporary regulatory measures are provided on page 5.

Policy Framework

The Group regularly benchmarks and aligns its policy framework against existing prudential and regulatory standards. Potential developments in Australian and international standards, and global best practice are also considered.

The Group continues to monitor and take actions to enhance and strengthen its risk culture. The Group has a formal Risk Management Approach (RMA) that creates clear obligations and transparency over risk management and strategy decisions. A risk accountability model (Three Lines of Accountability) requires business management to operate responsibly by taking well understood and managed risks that are appropriately and adequately priced.

2 Commonwealth Bank of Australia – Pillar 3 Report

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Policy Framework (continued)

The application is reflected in the Group’s overall asset quality and capital position. In particular, the Group remains in a small group of banking institutions with an AA-/Aa3 credit rating. To maintain this strength, the Group continues to invest in its risk systems and management processes.

The Group’s capital forecasting process and capital plans are in place to ensure a sufficient capital buffer above minimum levels is maintained at all times. The Group manages its capital by regularly and simultaneously considering regulatory capital requirements, rating agency views on the capital required to maintain the Group’s credit rating, the market response to capital levels and stress testing. These views then cascade into consideration of the target capital level. The Group’s management of its capital adequacy is supported by robust capital management processes applied in each Business Unit (BU). The results are integrated into the Group’s risk-adjusted performance and pricing processes.

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This document has been prepared in accordance with Board approved policy and reporting requirements set out in APS 330.

APRA adopts a tiered approach to the measurement of an ADI’s capital adequacy:

Level 1: the Parent Bank (CBA) and offshore branches (the Bank) and APRA approved Extended Licensed Entities (ELE);
Level 2: the Consolidated Banking Group excluding the insurance and funds management businesses and the entities through which securitisation of Group assets is conducted; and
Level 3: the conglomerate group including the Group’s insurance and funds management businesses[1] (the Group).

The Group is required to report its assessment of capital adequacy on a Level 2 basis. The head of the Level 2 Group is the Parent Bank. Additional disclosure of capital ratios relating to material ADIs within the Group together with CBA’s own Level 1 capital ratios are included under APS 330 Table 6g of this report (page 7).

ASB Bank Limited (ASB) operates under Advanced Basel III status and is subject to regulation by the Reserve Bank of New Zealand (RBNZ). The RBNZ applies a similar methodology to APRA in calculating regulatory capital requirements. In December 2020, the Group:

Established a new banking entity in Amsterdam, CBA Europe N.V.; and
Completed the divestment of its 37.5% equity interest in BoCommLife Insurance Company (BoCommLife).
CBA Europe N.V., CommBank Europe Ltd (CBE) and PT Bank Commonwealth (PTBC) apply the Standardised Basel III methodology in calculating regulatory capital requirements.

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The transfer of regulatory capital and funding within the Group is subject to restrictions imposed by local regulatory requirements. In particular, APS 222 “Associations with Related Entities” establishes prudential limits on the level of exposure that the Bank may have to a related entity.

The Bank and all of the subsidiaries of the Group are adequately capitalised. With the exception of RBNZ imposed restrictions on the payment of dividends (refer to page 6), there are no restrictions or other major impediments on the transfer of funds within the Group. There are no capital deficiencies in non-consolidated (regulatory) subsidiaries in the Group.

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1 A detailed list of non-consolidated entities is provided in Appendix 11.5.

Commonwealth Bank of Australia – Pillar 3 Report 3

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The Group actively manages its capital to balance the perspectives of various stakeholders (regulators, rating agencies and shareholders). This is achieved by optimising the mix of capital, while maintaining adequate capital ratios throughout the financial year. The Group’s capital is managed within a formal framework, its ICAAP, which is an integration of risk, financial and capital management processes.

APRA advises the Group of its Prudential Capital Ratio (PCR), which represents the regulatory minimum CET1, Tier 1 and Total Capital ratios that the Group is required to maintain at all times. In order to ensure there is no breach of these minimum levels, APRA expects the Group to maintain a prudent buffer over these prescribed minimum levels. The PCR is subject to an ongoing review by APRA and is formally reassessed on an annual basis.

The Group is required to inform APRA immediately of any breach or potential breach of its PCR, including details of remedial action taken or planned to be taken.

The Group has a range of instruments and methodologies available to effectively manage capital. These include share issues and buybacks, dividend and Dividend Reinvestment Plan (DRP) policies, hybrid capital raising and dated and undated subordinated debt issues. All major capital related initiatives require approval by the Board.

The Group’s capital position is monitored on a continuous basis and reported monthly to the Executive Leadership Team of the Group and at regular intervals throughout the year to the Board Risk and Compliance Committee. Capital forecasts are updated on a continuous basis and a detailed capital plan is presented to the Board annually.

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Capital – CET1 (APRA) +100bpts in 1H21

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1 3
2
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1 Relates to additional receipt of funds as part of the divestment of CommInsure Life, the completion of the divestment of BoCommLife, and benefit from the revised calculation of non-cash gains and losses on disposal of previously announced divestments.

2 The benefit from a 50% reduction in APRA’s operational risk regulatory capital add-on from $1 billion to $500 million (reduction of $6.25 billion RWA).

3 The 2020 final dividend included the issuance of $264 million of shares (CET1 impact of 6 basis points) in respect of the DRP.

The Group has a strong capital position, with the 31 December 2020 CET1 ratio (APRA) of 12.6%, above APRA’s ‘unquestionably strong’ benchmark of 10.5% and well above the prudential minimum of 8%. The CET1 ratio was consistently well in excess of regulatory minimum capital adequacy requirements at all times throughout the half year ended 31 December 2020.

After allowing for the impact of the 2020 final dividend, net of shares issued under the DRP (-32 basis points), the CET1 ratio increased by 132 basis points in the half year ended 31 December 2020. This was driven by capital generated from earnings (+88 basis points), benefit from divestments (+42 basis points), and a 50% reduction in APRA’s operational risk capital add-on (+17 basis points). This was partially offset by higher underlying RWA (-13 basis points) and other items (-2 basis points).

Further details on the movements in RWA are provided on page 10.

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The following significant capital initiatives were undertaken during the half year ended 31 December 2020:

Common Equity Tier 1 Capital

The DRP in respect of the 2020 final dividend was satisfied by the issuance of $264 million of ordinary shares, representing a participation rate of 15.2%.

Tier 2 Capital

In August 2020, the Bank issued an AUD205 million subordinated note and an AUD200 million subordinated note that are both Basel III compliant Tier 2 capital;
In September 2020, the Bank issued an AUD1,400 million subordinated note that is Basel III compliant Tier 2 capital; and
In December 2020, the Bank issued an AUD270 million subordinated note that is Basel III compliant Tier 2 capital.

4 Commonwealth Bank of Australia – Pillar 3 Report

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APRA has implemented a set of capital, liquidity and funding reforms based on the Basel Committee on Banking Supervision (BCBS) “Basel III” framework. The objectives of the reforms are to increase the quality, consistency and transparency of capital, to enhance the risk coverage framework, and to reduce systemic and pro-cyclical risk. The APRA prudential standards require a minimum CET1 ratio of 4.5% effective from 1 January 2013. An additional CET1 capital conservation buffer of 3.5%, inclusive of a Domestic Systemically Important Bank (D-SIB) requirement of 1% and a CCyB[1 ] of 0% (effective from 1 January 2016), brings the minimum CET1 ratio requirement to 8%.

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In July 2017, APRA released an information paper establishing the quantum of additional capital required for the Australian banking sector to have capital ratios that are unquestionably strong.

APRA’s expectation is that the Australian major banks will operate for the majority of the year with a CET1 ratio of 10.5% or more. As at 31 December 2020, the Group’s CET1 ratio was 12.6%, and was above the 10.5% benchmark for the entire 2020 calendar year.

Subsequently, APRA issued proposed revisions to the overall design of the capital framework and further detail of the proposed reforms is provided in ‘Regulatory Reforms’ below.

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On 19 March 2020, APRA announced temporary changes to its expectations regarding bank capital ratios and advised that, provided banks are able to meet their minimum capital requirements, the capital buffers built up over recent years to meet the 10.5% unquestionably strong benchmark CET1 capital ratio can be utilised to facilitate ongoing lending to the economy during the period of disruption caused by COVID-19.

On 23 March 2020, APRA announced its regulatory approach to COVID-19 customer support measures being offered by banks in the current environment. Additional guidance was provided in July 2020 and September 2020. This included capital relief in the form of ADIs being able to 'stop the clock' on arrears and relief for restructured loans. Further details are provided on page 12.

The Group has introduced a number of support measures for customers impacted by COVID-19, which include loan repayment deferral arrangements and the origination of loans under the Government’s Small and Medium Enterprises (SME) Guarantee Scheme. Further details of these measures are provided on page 12.

On 15 December 2020, APRA announced that its guidance issued in July 2020 requiring banks to preserve capital through retaining at least half of their earnings during the period of disruption caused by COVID-19 will no longer apply from calendar year 2021. Nevertheless, in determining the appropriate level of dividends, APRA expects banks to moderate dividend payout ratios to ensure they are sustainable, taking into account the outlook for profitability, capital and the broader environment.

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APRA

In February 2018, APRA commenced consultation on a number of proposed changes to the ADI capital framework, commonly known as “Basel III”. Following an initial round of consultation and industry responses, in December 2020, APRA released a further consultation package titled “Discussion paper – A more flexible and resilient capital framework for ADIs”. The objectives of the proposed changes are to increase the risk sensitivity within the capital

framework, to enhance the ability to respond flexibly to future stress events, and to improve the comparability of the Australian framework with international standards. The package sets out APRA’s key proposals based on feedback received in earlier consultations. APRA’s proposals include:

Higher regulatory capital buffers, with the CCyB set at 100 basis points for all ADIs and the capital conservation buffer increasing from 250 basis points to 400 basis points for Internal Ratings-based (IRB) ADIs such as CBA;
Implementing more risk sensitive risk weights, particularly for residential mortgage lending, by targeting higher risk segments, such as interest only and investor mortgages;
For non-retail credit portfolios, closer alignment of risk estimates relative to overseas peers and allowing internal models to be used for commercial property exposures. The expected decrease in RWAs due to this proposal will be tempered through higher scaling factors;
RWA for New Zealand subsidiaries to be determined under RBNZ rules at the consolidated group level; and
Implementing a 72.5% output floor to limit the capital benefit for IRB ADIs relative to standardised ADIs.

These proposals will result in changes to the calculation of RWA and will, therefore, impact the presentation of bank capital ratios. APRA expects that capital ratios will increase, as the amount of RWA will likely fall. APRA further reiterated that it is targeting a capital outcome in dollar terms that remains consistent with the “unquestionably strong” capital benchmark.

APRA intends to implement the Basel III changes on 1 January 2023.

In January 2019, the Basel Committee on Banking Supervision released “Minimum capital requirements for market risk” which finalised changes to the identification and measurement of market risk under both the standardised approach and the internal model approach. APRA is yet to commence consultation on APS 116 “Capital Adequacy: Market Risk” and implementation is not expected until 2024.

In October 2019, APRA released a consultation paper on APS 111 “Capital Adequacy: Measurement of Capital” (APS 111). The consultation paper outlines APRA’s proposal to change its existing approach on equity exposures to banking and insurance subsidiaries of ADIs. APRA has proposed that each individual equity exposure will be risk-weighted at 250% up to 10% of the ADI’s Level 1 CET1 capital, with any excess above that threshold to be deducted from Level 1 CET1 capital. In November 2020, APRA advised that the 10% threshold will apply to new or additional investments into banking and insurance subsidiaries until APS 111 is finalised and implemented.

On 9 July 2019, APRA confirmed that the Australian loss-absorbing capacity regime will be established under the existing capital framework. For D-SIBs, including CBA, APRA will require an additional Total Capital requirement of 3% of RWA based on the existing capital framework, effective 1 January 2024. APRA is evaluating whether any consequential adjustment to the required amount of loss absorbing capacity is necessary, taking into account proposed changes to the capital framework announced in December 2020 as outlined above.

In August 2019, APRA released the final APS 222 “Associations with Related Entities”. The revised standard is intended to strengthen the ability of ADIs to monitor, limit and control risk arising from transactions and other associations with related entities. These new requirements will be in place from 1 January 2022.

1 In December 2020, APRA announced that the CCyB for Australian exposures will remain at 0%. The Bank has limited exposures to those offshore jurisdictions in which a CCyB in excess of 0% has been imposed.

Commonwealth Bank of Australia – Pillar 3 Report 5

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Reserve Bank of New Zealand (RBNZ)

In December 2019, the RBNZ confirmed that the RWA of IRB banks, such as ASB, will increase to approximately 90% of that required under a standardised approach. In addition, for those banks deemed systemically important, including ASB, the Tier 1 capital requirement will increase to 16% of RWA, of which 13.5% must be in the form of CET1 capital. Tier 2 capital will remain in the framework, and can contribute up to 2% of the 18% minimum Total Capital ratio. Existing Additional Tier 1 and Tier 2 contingent instruments issued by New Zealand banks will no longer be eligible under RBNZ’s new capital criteria and will be phased out.

The RBNZ announced that these reforms will commence from 1 July 2022 with a 6 year implementation period until 1 July 2028.

Revisions to Additional Tier 1 and Tier 2 eligibility will commence on 1 July 2021.

On 2 April 2020, the RBNZ announced a freeze on the distribution of dividends by banks in New Zealand due to COVID-19. This restriction will remain in place until 31 March 2021, or later if required. Dividends from the Bank’s New Zealand subsidiary, ASB, only affect the Group’s Level 1 CET1 capital ratio. As at 31 December 2020, the Group’s Level 1 CET1 capital ratio was 12.8%, well above APRA’s unquestionably strong benchmark, and as such, the Group is well placed to absorb the suspension of dividends.

The RBNZ has provided concessions similar to those provided by APRA for loan deferrals granted in response to COVID-19.

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	31 Dec 20	30 Jun 20	31 Dec 19
Summary Group Capital Adequacy Ratios(Level 2)	%	%	%
Common Equity Tier 1	12. 6	11. 6	11. 7
Tier 1	15. 0	13. 9	14. 1
Tier 2	3. 9	3. 6	3. 3
Total Capital(APRA)	18. 9	17. 5	17. 4
Common Equity Tier 1(Internationally Comparable) 1	18. 7	17. 4	17. 5

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

	APRA	APRA	APRA
	31 Dec 20	30 Jun 20	31 Dec 19
Group Regulatory Capital Position	$M	$M	$M
Ordinary share capital and treasury shares1	38,432	38,182	38,180
Reserves	2,287	2,668	1,903
Retained earnings	33,915	30,886	30,808
Non-controllinginterests	–	–	–
Common Equity Tier 1 Capital before regulatory adjustments	74,634	71,736	70,891
Common EquityTier 1 regulatoryadjustments	(17,539)	(19,163)	(18,511)
Common Equity Tier 1 Capital	57,095	52,573	52,380
Additional Tier 1 Capital	10,825	10,841	10,838
Tier 1 Capital	67,920	63,414	63,218
Tier 2 Capital	17,822	16,429	14,735
Total Capital	85,742	79,843	77,953
Risk Weighted Assets	453,616	454,948	449,154

1 Inclusive of treasury shares of $15 million (30 June 2020: $51 million, 31 December 2019: $54 million) held by the Group’s eligible employee share scheme trusts.

Further details on the composition of the Group’s capital are detailed in Appendix 11.1.

6 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 6g – Capital Ratios – Level 1 and Major Subsidiaries

APS 330 Table 6g – Capital Ratios – Level 1 and Major Subsidiaries
	31 Dec 20	30 Jun 20	31 Dec 19
Significant Group ADIs	%	%	%
CBA Level 1 CET1 Capital ratio	12. 8	11. 9	12. 1
CBA Level 1 Tier 1 Capital ratio	15. 3	14. 4	14. 6
CBA Level 1 Total Capital ratio	19. 3	18. 1	18. 0
ASB CET1 Capital ratio	12. 2	11. 5	11. 7
ASB Tier 1 Capital ratio	13. 9	13. 3	13. 5
ASB Total Capital ratio	14. 6	14. 0	14. 2
	31 Dec 20	30 Jun 20	31 Dec 19
CBA Level 1	$M	$M	$M
Common Equity Tier 1 Capital	55,312	52,283	52,629
Tier 1 Capital	66,137	63,124	63,467
Tier 2 Capital	17,488	16,084	14,507
Total Capital	83,625	79,208	77,974
Risk Weighted Assets	433,568	438,345	433,275
	31 Dec 20	30 Jun 20	31 Dec 19
ASB Banking Group	NZ$M	NZ$M	NZ$M
Common Equity Tier 1 Capital	7,119	6,496	6,651
Tier 1 Capital	8,119	7,496	7,651
Tier 2 Capital	433	433	429
Total Capital	8,552	7,929	8,080
Risk Weighted Assets	58,377	56,542	56,784

Commonwealth Bank of Australia – Pillar 3 Report 7

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The APRA Basel III capital requirements are more conservative than those of the BCBS, leading to lower reported capital ratios. In July 2015, APRA published a study on the calculation of internationally comparable capital by Australian banks entitled “International capital comparison study” (APRA study). As at 31 December 2020, the Group’s internationally comparable CET1, Tier 1 and Total Capital ratios were 18.7%, 21.8% and 26.9% respectively. The basis of this analysis aligns with the APRA study. The following table provides details on the differences, as at 31 December 2020, between the APRA Basel III capital requirements and the internationally comparable capital ratios.

comparable capital ratios.
					Total
	APRA Study		CET1	Tier 1	Capital
Item	Reference	Description of Adjustment	%	%	%
Basel III (APRA)			12. 6	15. 0	18. 9
Equity investments	Appendix 1	Balances below prescribed threshold are risk weighted,
	Items 1, 2, 4	compared to a 100% CET1 deduction under APRA’s	0. 7	0. 6	0. 5
		requirements.
Capitalised expenses	Appendix 1 Item 5	Balances are risk weighted, compared to a 100% CET1 deduction under APRA's requirements.	0. 1	0. 1	0. 1
Deferred tax assets	Appendix 1	Balances below prescribed threshold are risk weighted,
	Item 3	compared to a 100% CET1 deduction under APRA’s	0. 5	0. 4	0. 3
		requirements.
IRRBB RWA	3.3.2	APRA requires capital to be held for IRRBB. The BCBS does not have any capital requirement.	0. 4	0. 5	0. 6
Residential mortgages	3.3.1	Loss Given Default (LGD) of 15%, compared to the 20% LGD
		floor under APRA’s requirements and adjustments for higher	2. 4	2. 8	3. 5
		correlation factor applied by APRA for Australian residential
Other retail standardised exposures	3.3.6	Risk weighting of 75%, rather than 100% under APRA’s requirements.	–	–	0. 1
Unsecured non-retail exposures	3.3.3	LGD of 45%, compared to the 60% or higher LGD under APRA’s requirements.	0. 4	0. 5	0. 6
Non-retail undrawn commitments	3.3.4	Credit conversion factor of 75%, compared to 100% under APRA’s requirements.	0. 4	0. 5	0. 6
Specialised lending	3.3.5	Use of AIRB Probability of Default (PDs) and LGDs for
		income producing real estate and project finance exposures,
		reduced by application of a scaling factor of 1.06. APRA
		applies higher risk weights under a supervisory slotting	1. 1	1. 3	1. 6
		approach, but does not require the application of the scaling
		factor.
Currency conversion	3.3.7	Increase in the A$ equivalent concessional threshold level for small business retail and SME corporate exposures.	0. 1	0. 1	0. 2
Subtotal1			18. 7	21. 8	27. 0
Basel III non-compliant		Removal of Basel III non-compliant Tier 1 and Tier 2
instruments		instruments that are currently subject to transitional rules.	–	–	(0. 1)
Basel III (Internationally	Comparable - aligns with APRA study)		18. 7	21. 8	26. 9

1 Represents ratios prior to adjustments made for non-compliant Basel III Tier 1 and Tier 2 Capital Instruments. This value is used in determining leverage ratio (internationally comparable) as determined on page 9.

The above calculations do not include the impact of a Basel I capital floor, which was introduced as a transitional measure as part of the implementation of Basel II. The Australian banks have now fully implemented the existing Basel III requirements and, therefore, it is difficult to calculate the impact of such a floor. APRA concluded in the APRA study that it is difficult to make adjustments for the floor in internationally comparable calculations at this time but the inclusion of a floor could reduce internationally comparable ratios by a material amount.

The Group’s internationally comparable CET1 ratio quoted above does not take into consideration the concessional treatment advocated by the BCBS in its 3 April 2020 report “Measures to reflect the impact of COVID-19”. Applying the transitional arrangements for expected credit loss accounting under AASB 9 Financial Instruments (AASB 9) could result in an uplift to the Group’s 31 December 2020 internationally comparable CET1 ratio of up to 30 basis points.

8 Commonwealth Bank of Australia – Pillar 3 Report

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The Group’s Leverage Ratio, defined as Tier 1 Capital as a percentage of total exposures, was 6.0% at 31 December 2020 on an APRA basis and 6.8% on an internationally comparable basis. The ratio increased 10 basis points on an APRA basis from 30 June 2020 driven by higher Tier 1 Capital, partly offset by growth in exposures.

In November 2018, APRA released draft prudential and reporting standards, including changes to the definition of exposures related to derivatives and off Balance Sheet items and advocating a minimum leverage ratio requirement of 3.5% for IRB banks, applicable from 1 January 2023.

Summary Group Leverage Ratio 1	31 Dec 20	30 Sep 20	30 Jun 20	31 Mar 20	31 Dec 19
Tier 1 Capital ($M)	67,920	64,423	63,414	61,142	63,218
Total Exposures ($M) 2	1,125,048	1,105,321	1,073,131	1,102,574	1,040,423
Leverage Ratio(APRA) (%)	6. 0	5. 8	5. 9	5. 5	6. 1
Leverage Ratio(Internationally Comparable) (%) 3	6. 8	6. 6	6. 7	6. 4	7. 0

1 Refer to Appendix 11.2 for further details on the composition of the leverage ratio.

2 Total Exposures is the sum of on Balance Sheet exposures, derivatives, Securities Financing Transactions (SFTs), and off Balance Sheet exposures, net of any Tier 1 regulatory deductions, as outlined in APS 110 “Capital Adequacy” (APS 110). Refer to Appendix 11.2 for the calculation of the 31 December 2020 exposures.

3 The Tier 1 Capital included in the calculation of the internationally comparable leverage ratio aligns with the APRA study and includes Basel III non-compliant Tier 1 instruments that are currently subject to transitional rules.

Commonwealth Bank of Australia – Pillar 3 Report 9

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RWA are calculated using the AIRB approach for the majority of the Group’s credit risk exposures. Internal assessment and supervisory formula approaches are used, where relevant, for non-rated securitisation exposures and for rated exposures where APS 120 “Securitisation” (APS 120) prohibits the Group using the ratings-based approach. The ratings-based approach is used for securitisation exposures rated by External Credit Assessment Institutions (ECAI) where APS 120 allows or requires.

APS 330 Table 6b to 6f – Basel III Capital Requirements (RWA)

	Risk Weighted Assets	Change in RWA for
	31 Dec 20 30 Jun 20 31 Dec 19	December 2020 half
Asset Category	$M $M $M	$M %
Credit Risk Subject to AIRB approach1
Corporate SME corporate SME retail SME retail secured by residential mortgage Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	69,157 69,577 67,236 30,662 30,890 31,560 6,583 6,665 5,976 3,087 3,360 3,314 2,668 1,838 1,682 6,424 6,667 7,964 151,950 148,294 147,865 5,816 6,697 7,802 11,511 12,126 13,490	(420) (0. 6) (228) (0. 7) (82) (1. 2) (273) (8. 1) 830 45. 2 (243) (3. 6) 3,656 2. 5 (881) (13. 2) (615) (5. 1)
Total RWA subject to AIRB approach Specialised lending Subject to standardised approach Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets	287,858 286,114 286,889 60,136 58,611 56,024 1,194 957 1,309 752 742 756 2,660 2,929 4,586 286 267 218 150 68 66 6,466 6,635 6,478 1,017 1,132 1,225 8,504 10,281 9,752	1,744 0. 6 1,525 2. 6 237 24. 8 10 1. 3 (269) (9. 2) 19 7. 1 82 large (169) (2. 5) (115) (10. 2) (1,777) (17. 3)
Total RWA subject to standardised approach	21,029 23,011 24,390	(1,982) (8. 6)
Securitisation	2,981 3,015 3,191	(34) (1. 1)
Credit valuation adjustment	4,446 3,057 4,358	1,389 45. 4
Central counterparties	450 386 365	64 16. 6
Total RWA for credit risk exposures	376,900 374,194 375,217	2,706 0. 7
Traded market risk Interest rate risk in the banking book Operational risk	11,161 12,457 5,428 15,561 11,085 8,998 49,994 57,212 59,511	(1,296) (10. 4) 4,476 40. 4 (7,218) (12. 6)
Total risk weighted assets	453,616 454,948 449,154	(1,332) (0. 3)

1 Pursuant to APRA requirements, RWA amounts derived from AIRB risk weight functions have been multiplied by a scaling factor of 1.06.

10 Commonwealth Bank of Australia – Pillar 3 Report

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Risk Weighted Assets

Total RWA decreased by $1.3 billion on the prior half to $453.6 billion driven by decreases in operational risk RWA and traded market risk RWA, partly offset by higher credit risk RWA and IRRBB RWA.

Total Risk Weighted Assets ($B)

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CET1 impact bpts
(7) 3 (11) 19 4
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Credit Risk RWA

Credit risk RWA increased by $2.7 billion on the prior half to $376.9 billion, primarily driven by:

Volume growth across commercial portfolios, residential mortgages and bank and sovereign exposures, partly offset by a reduction in unsecured retail portfolios and in exposures subject to standardised treatment (+$10.4 billion); partly offset by
Credit quality improvement (-$3.9 billion), primarily across retail portfolios, driven by:
improved loan serviceability;
growth in mortgage offset balances;
higher provision coverage on defaulted assets, reducing RWA;

Credit Risk Weighted Assets ($B)

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1
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1 Credit quality includes portfolio mix.

Traded Market Risk RWA

Traded market risk RWA decreased by $1.3 billion or 10% on the prior half. This was mainly due to the implementation of an enhanced model measurement approach for certain interest rate option exposures.

Interest Rate Risk in the Banking Book (IRRBB) RWA

IRRBB RWA increased by $4.5 billion or 40% on the prior half. This was due to changes in interest rate risk management positions and increased size of the replicating portfolio due to growth in deposits.

Operational Risk RWA

Operational risk RWA decreased by $7.2 billion or 13% on the prior half. The decrease is mainly due to a 50% reduction in APRA’s operational risk add-on from $12.5 billion to $6.25 billion.

The Group regularly reviews and updates its operational risk RWA to reflect material changes in its operational risk profile in accordance with the Operational Risk Management Framework and governance processes.

Foreign currency movements due to appreciation of the AUD against major currencies (-$2.5 billion); and
Data and methodology, credit risk estimates and other changes (-$1.3 billion).

Explanation of Change in Credit RWA

The composition of the movement in credit RWA over the half is shown below.

Asset Category	Credit RWA movement drivers
	Credit risk estimates Change in changes and Data and RWA for Volume FX regulatory methodology Change in Dec 20 half changes changes treatments changes credit quality 1 $M $M $M $M $M $M
AIRB corporate including SME and specialised lending	522 6,181 (2,007) (2,100) (527) (1,025)
AIRB bank AIRB sovereign AIRB consumer retail Standardised2 Securitisation exposures	(243) 383 (190) 39 – (475) 830 569 (38) 277 – 22 2,160 4,758 70 1,273 263 (4,204) (529) (1,396) (375) (124) (351) 1,717 (34) (115) – – – 81
Total credit RWA movement	2,706 10,380 (2,540) (635) (615) (3,884)

1 Credit quality includes portfolio mix. 2 Including other assets, Central Counterparty (CCP) and Credit Valuation Adjustment (CVA).

Commonwealth Bank of Australia – Pillar 3 Report 11

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The Group has introduced a number of support measures for customers impacted by the COVID-19 pandemic, including loan repayment deferrals. To support ADIs in providing this assistance to customers, APRA provided temporary capital relief which had the effect that where a borrower was otherwise performing, and their loan was subject to repayment deferrals as part of a COVID-19 support package, the repayment deferrals would not be treated as a period of arrears and the loan would not be regarded as restructured. Additionally, to facilitate ADIs transitioning impacted borrowers to a regular repayment schedule, APRA will temporarily adjust the capital requirements so that a borrower’s facilities can be restructured and immediately returned to a performing status provided the restructure occurs before 31 March 2021. The RBNZ has provided similar concessions for repayment deferrals granted in response to COVID-19.

As at 31 December 2020, ~38,000 accounts (30 June 2020: ~240,000 accounts) with a total Exposure at Default (EAD) of $14.0 billion (30 June 2020: ~$73.5 billion) have been granted COVID-19 repayment deferrals. Of these ~37,000 accounts (30 June 2020: ~234,000 accounts) with a total EAD of $13.6 billion (30 June 2020: ~$71.9 billion) qualify for APRA/RBNZ concessional treatment, shown in the table below.

Loan Deferrals by Asset Category

Loan Deferrals by Asset Category
Asset Category	31 December 2020	30 June 2020
	$M $M Exposure at Default Risk Weighted Assets	$M $M Exposure at Default Risk Weighted Assets
Corporate SME corporate SME retail SME retail secured by residential mortgage Residential mortgage Qualifying revolving retail Other retail Specialised lending	10 11 279 205 142 86 108 78 13,026 5,768 – – 5 5 48 55	813 714 8,305 4,799 3,400 1,633 2,429 1,484 54,855 22,683 27 21 113 159 1,949 2,080
Total	13,618 6,208	71,891 33,573

The Group has also participated in the Australian Government’s SME Guarantee Scheme. APRA has confirmed that the SME Guarantee Scheme will be regarded as an eligible guarantee 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.

12 Commonwealth Bank of Australia – Pillar 3 Report

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The following tables detail credit risk exposures subject to AIRB and standardised approaches.

APS 330 Table 7i – Credit risk exposures by portfolio type and modelling approach

	31 December 2020
	Off Balance Sheet	Average
Portfolio Type	On Non- Balance market Market Sheet related related Total $M $M $M $M	exposure for December 2020 half 1 $M	Change in exposure for December 2020 half 2 $M %
Subject to AIRB approach
Corporate SME corporate SME retail SME retail secured by residential mortgage Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	65,063 48,518 10,112 123,693 43,057 10,566 789 54,412 7,082 4,508 11 11,601 3,649 1,655 – 5,304 135,955 1,151 2,366 139,472 17,057 404 7,255 24,716 543,741 80,069 – 623,810 8,124 16,502 – 24,626 6,662 3,022 – 9,684	123,330 53,134 11,593 5,421 123,798 24,445 611,662 24,968 9,770	726 0. 6 2,556 4. 9 16 0. 1 (233) (4. 2) 31,348 29. 0 542 2. 2 24,297 4. 1 (683) (2. 7) (171) (1. 7)
Total AIRB approach Specialised lending Subject to standardised approach Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets Central counterparties	830,390 166,395 20,533 1,017,318 56,649 9,844 2,204 68,697 1,026 153 15 1,194 604 141 7 752 1,872 774 8 2,654 594 1 – 595 666 – – 666 13,090 1,681 – 14,771 968 36 – 1,004 23,408 – – 23,408 – – 10,641 10,641	988,121 67,565 1,076 747 2,787 580 495 14,936 1,062 20,604 10,562	58,398 6. 1 2,264 3. 4 237 24. 8 11 1. 5 (266) (9. 1) 30 5. 3 342 large (331) (2. 2) (116) (10. 4) 5,609 31. 5 158 1. 5
Total standardised approach	42,228 2,786 10,671 55,685	52,849	5,674 11. 3
Total Credit Exposures 3	929,267 179,025 33,408 1,141,700	1,108,535	66,336 6. 2

1 The simple average of balances as at 31 December 2020 and 30 June 2020.

2 The difference between exposures as at 31 December 2020 and 30 June 2020. 3 Total credit risk exposures (calculated as EAD) do not include equities or securitisation exposures.

Explanation of Change in Credit Risk Exposure

Details of credit risk exposure movements over the half year are as follows.

	Total
	exposure
	change
Asset Category	$M	Regulatory Exposure Driver
AIRB corporate (including SME corporate and SME retail)	5,329	Volume growth across most portfolios, partly offset by
and specialised lending		foreign exchange rate (FX) movements
AIRB sovereign	31,348	Increase in liquid assets held with central banks
AIRB bank	542	Increase in liquid assets
AIRB consumer retail	23,443	Volume growth in residential mortgages, partly offset by
		reductions in other consumer retail portfolios
Total advanced and specialised lending	60,662
Standardised (including other assets and central	5,674	Higher volumes of other assets, partly offset by FX
counterparties)		movements
Total (excluding securitisation and equity exposures)	66,336

Commonwealth Bank of Australia – Pillar 3 Report 13

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APS 330 Table 7i – Credit risk exposures by portfolio type and modelling approach (continued)

Portfolio Type	30 June 2020	Average exposure for June 2020 half 1 $M	Change in exposure for June 2020 half 2 $M %
	On Non- Balance market Market Sheet related related Total $M $M $M $M Off Balance Sheet

Subject to AIRB approach
Corporate SME corporate SME retail SME retail secured by residential mortgage Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	66,476 45,826 10,665 122,967 42,556 8,556 744 51,856 7,477 4,108 – 11,585 4,035 1,502 – 5,537 104,584 1,119 2,421 108,124 16,119 404 7,651 24,174 526,642 72,871 – 599,513 8,192 17,117 – 25,309 6,716 3,139 – 9,855	122,262 51,840 11,096 5,571 99,416 25,491 595,266 25,994 10,269	1,410 1. 2 32 0. 1 978 9. 2 (67) (1. 2) 17,416 19. 2 (2,635) (9. 8) 8,495 1. 4 (1,370) (5. 1) (827) (7. 7)
Total AIRB approach	782,797 154,642 21,481 958,920	947,205	23,432 2. 5
Specialised lending Subject to standardised approach Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets Central counterparties	55,065 8,902 2,466 66,433 794 139 24 957 555 175 11 741 2,018 878 24 2,920 564 1 – 565 324 – – 324 13,433 1,669 – 15,102 1,095 25 – 1,120 17,799 – – 17,799 – – 10,483 10,483	65,332 1,133 749 3,751 520 322 14,759 1,172 17,239 9,749	2,203 3. 4 (352) (26. 9) (15) (2. 0) (1,662) (36. 3) 90 18. 9 5 1. 6 686 4. 8 (104) (8. 5) 1,121 6. 7 1,469 16. 3
Total standardised approach	36,582 2,887 10,542 50,011	49,394	1,238 2. 5
Total credit exposures 3	874,444 166,431 34,489 1,075,364	1,061,931	26,873 2. 6

1 The simple average of balances as at 30 June 2020 and 31 December 2019.

2 The difference between exposures as at 30 June 2020 and 31 December 2019. 3 Total credit risk exposures (calculated as EAD) do not include equities or securitisation exposures.

14 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 7i – Credit risk exposures by portfolio type and modelling approach (continued)

Portfolio Type	31 December 2019	Average exposure for December 2019 half 1 $M	Change in exposure for December 2019 half 2 $M %
	On Non- Balance market Market Sheet related related Total $M $M $M $M Off Balance Sheet

Subject to AIRB approach
Corporate SME corporate SME retail SME retail secured by residential mortgage Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	67,614 44,267 9,676 121,557 42,818 8,398 608 51,824 6,970 3,637 – 10,607 4,112 1,492 – 5,604 87,248 1,225 2,235 90,708 19,206 377 7,226 26,809 518,096 72,922 – 591,018 9,977 16,702 – 26,679 7,610 3,072 – 10,682	120,201 51,946 10,762 5,666 90,307 30,225 584,377 27,024 10,926	2,713 2. 3 (244) (0. 5) (310) (2. 8) (123) (2. 1) 803 0. 9 (6,831) (20. 3) 13,282 2. 3 (692) (2. 5) (489) (4. 4)
Total AIRB approach	763,651 152,092 19,745 935,488	931,434	8,109 0. 9
Specialised lending Subject to standardised approach	53,751 8,821 1,658 64,230	62,747	2,964 4. 8
Corporate	1,155 150 4 1,309	1,450	(281) (17. 7)
SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets Central counterparties	596 160 – 756 3,664 719 199 4,582 474 1 – 475 319 – – 319 12,693 1,723 – 14,416 1,196 28 – 1,224 16,678 – – 16,678 – – 9,014 9,014	789 4,605 484 317 14,675 1,236 15,606 8,502	(66) (8. 0) (46) (1. 0) (20) (4. 0) 4 1. 3 (517) (3. 5) (25) (2. 0) 2,145 14. 8 1,025 12. 8
Total standardised approach	36,775 2,781 9,217 48,773	47,664	2,219 4. 8
Total credit exposures 3	854,177 163,694 30,620 1,048,491	1,041,845	13,292 1. 3

1 The simple average of balances as at 31 December 2019 and 30 June 2019.

2 The difference between exposures as at 31 December 2019 and 30 June 2019. 3 Total credit risk exposures (calculated as EAD) do not include equities or securitisation exposures.

Commonwealth Bank of Australia – Pillar 3 Report 15

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APS 330 Table 7b – Credit risk exposure by portfolio type

	As at	Half year
	31 Dec 20	average1
Portfolio Type	$M	$M
Corporate	124,887	124,406
SME corporate	55,164	53,881
SME retail	14,255	14,380
SME retail secured by residential mortgage	5,304	5,421
Sovereign	140,067	124,378
Bank	25,382	24,940
Residential mortgage	638,581	626,598
Qualifying revolving retail	24,626	24,968
Other retail	10,688	10,832
Specialised lending	68,697	67,565
Other assets	23,408	20,604
Central counterparties	10,641	10,562
Total credit exposures 2	1,141,700	1,108,535

1 The simple average of closing balances of each half year.
2 Total credit risk exposures do not include equities or securitisation exposures.

	As at	Half year
	30 Jun 20	average 1
Portfolio Type	$M	$M
Corporate	123,924	123,395
SME corporate	52,597	52,589
SME retail	14,505	14,847
SME retail secured by residential mortgage	5,537	5,571
Sovereign	108,689	99,936
Bank	24,498	25,813
Residential mortgage	614,615	610,025
Qualifying revolving retail	25,309	25,994
Other retail	10,975	11,441
Specialised lending	66,433	65,332
Other assets	17,799	17,239
Central counterparties	10,483	9,749
Total credit exposures2	1,075,364	1,061,931

1 The simple average of closing balances of each half year.
2 Total credit risk exposures do not include equities or securitisation exposures.

	As at	Half year
	31 Dec 19	average1
Portfolio Type	$M	$M
Corporate	122,866	121,651
SME corporate	52,580	52,735
SME retail	15,189	15,367
SME retail secured by residential mortgage	5,604	5,666
Sovereign	91,183	90,791
Bank	27,128	30,542
Residential mortgage	605,434	599,052
Qualifying revolving retail	26,679	27,024
Other retail	11,906	12,162
Specialised lending	64,230	62,747
Other assets	16,678	15,606
Central counterparties	9,014	8,502
Total credit exposures 2	1,048,491	1,041,845

1 The simple average of closing balances of each half year. 2 Total credit risk exposures do not include equities or securitisation exposures.

16 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 7c – Credit risk exposure by portfolio type and geographic distribution

	31 December 2020 1
	New
	Australia Zealand Other Total
Portfolio Type	$M $M $M $M
Corporate SME corporate SME retail2 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets Central counterparties	81,651 12,600 30,636 124,887 39,541 15,137 486 55,164 17,568 1,864 127 19,559 85,914 7,421 46,732 140,067 10,945 1,730 12,707 25,382 568,076 69,267 1,238 638,581 24,624 – 2 24,626 6,903 3,454 331 10,688 56,574 8,889 3,234 68,697 21,616 897 895 23,408 332 – 10,309 10,641
Total credit exposures 3	913,744 121,259 106,697 1,141,700

1 Balances are reported based on the risk domicile of the borrowers.
2 Including SME retail secured by residential property.
3 Total credit risk exposures do not include equities or securitisation exposures.

	30 June 2020 1
	New
	Australia Zealand Other Total
Portfolio Type	$M $M $M $M
Corporate SME corporate SME retail2 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending	77,090 11,963 34,871 123,924 37,109 14,812 676 52,597 18,022 1,859 161 20,042 64,862 7,240 36,587 108,689 10,928 1,399 12,171 24,498 548,608 64,615 1,392 614,615 25,307 – 2 25,309 7,050 3,538 387 10,975 53,884 8,511 4,038 66,433
Other assets Central counterparties	15,907 887 1,005 17,799 371 – 10,112 10,483
Total credit exposures 3	859,138 114,824 101,402 1,075,364

1 Balances are reported based on the risk domicile of the borrowers.
2 Including SME retail secured by residential property.
3 Total credit risk exposures do not include equities or securitisation exposures.

	31 December 2019 1
	New
	Australia Zealand Other Total
Portfolio Type	$M $M $M $M
Corporate SME corporate SME retail2 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets Central counterparties	73,582 12,311 36,973 122,866 36,759 15,195 626 52,580 17,348 3,233 212 20,793 53,485 4,121 33,577 91,183 11,152 1,887 14,089 27,128 540,242 63,601 1,591 605,434 26,677 – 2 26,679 7,759 3,746 401 11,906 51,738 8,473 4,019 64,230 14,544 1,038 1,096 16,678 381 – 8,633 9,014
Total credit exposures 3	833,667 113,605 101,219 1,048,491

1 Balances are reported based on the risk domicile of the borrowers.
2 Including SME retail secured by residential property.
3 Total credit risk exposures do not include equities or securitisation exposures.

Commonwealth Bank of Australia – Pillar 3 Report 17

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APS 330 Table 7d – Credit risk exposure by portfolio type and industry sector

Portfolio Type	31 December 2020
	Residential Other Asset Other mortgage personal finance Sovereign Bank finance Agriculture Mining $M $M $M $M $M $M $M $M Industry Sector
Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets	– – 3,753 – – 24,063 3,333 6,113 – – 3,397 – – 1,912 18,045 174 – – 2,915 – – 344 1,622 67 – – – 140,067 – – – – – – – – 25,382 – – – 638,581 – – – – – – – – 24,626 – – – – – – – 10,406 282 – – – – – – – 28 – – 275 – 1,115 – 2,156 – – – – – –
Central counterparties	– – – – 1,154 9,487 – –
Total credit exposures2	638,581 37,188 10,375 140,067 26,536 36,081 23,000 7,469

				Industry Sector(continued)	Industry Sector(continued)
				Retail/
				wholesale	Transport
	Manufacturing	Energy	Construction	trade	and storage	Property 3	Other	Total
Portfolio Type	$M	$M	$M	$M	$M	$M	$M	$M
Corporate	10,205	6,911	2,915	10,291	16,875	11,796	28,632	124,887
SME corporate	2,959	72	2,763	7,880	1,603	147	16,212	55,164
SME retail1	794	18	1,606	2,408	445	1,770	7,570	19,559
Sovereign	–	–	–	–	–	–	–	140,067
Bank	–	–	–	–	–	–	–	25,382
Residential mortgage	–	–	–	–	–	–	–	638,581
Qualifying revolving retail	–	–	–	–	–	–	–	24,626
Other retail	–	–	–	–	–	–	–	10,688
Specialised lending	53	2,378	–	275	1,766	61,343	1,464	68,697
Other assets	–	–	–	–	–	–	21,252	23,408
Central counterparties	–	–	–	–	–	–	–	10,641
Total credit exposures2	14,011	9,379	7,284	20,854	20,689	75,056	75,130	1,141,700

1 SME retail business lending secured by residential property has been allocated by industry.

2 Total credit risk exposures do not include equities or securitisation exposures.

3 Property includes Real Estate Investment Trusts (REIT) and excludes Business Services.

18 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 7d – Credit risk exposure by portfolio type and industry sector (continued)

Portfolio Type	30 June 2020
	Residential Other Asset Other mortgage personal finance Sovereign Bank finance Agriculture Mining $M $M $M $M $M $M $M $M Industry Sector

Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets	– – 3,623 – – 25,135 2,986 7,926 – – 3,228 – – 1,976 17,339 159 – – 3,293 – – 351 1,667 69 – – – 108,689 – – – – – – – – 24,498 – – – 614,615 – – – – – – – – 25,309 – – – – – – – 10,631 344 – – – – – – – 22 – – – – 1,464 – 2,150 – – – – – –
Central counterparties	– – – – 884 9,599 – –
Total credit exposures 2	614,615 38,090 10,510 108,689 25,382 37,061 21,992 9,618

				Industry Sector(continued)	Industry Sector(continued)
				Retail/
				wholesale	Transport
	Manufacturing	Energy	Construction	trade	and storage	Property 3	Other	Total
Portfolio Type	$M	$M	$M	$M	$M	$M	$M	$M
Corporate	9,909	6,353	3,319	9,508	16,875	12,010	26,280	123,924
SME corporate	2,906	93	2,672	7,230	1,480	157	15,357	52,597
SME retail1	836	18	1,588	2,376	457	1,832	7,555	20,042
Sovereign	–	–	–	–	–	–	–	108,689
Bank	–	–	–	–	–	–	–	24,498
Residential mortgage	–	–	–	–	–	–	–	614,615
Qualifying revolving retail	–	–	–	–	–	–	–	25,309
Other retail	–	–	–	–	–	–	–	10,975
Specialised lending	62	2,297	–	218	3,186	57,443	1,741	66,433
Other assets	–	–	–	–	–	–	15,649	17,799
Central counterparties	–	–	–	–	–	–	–	10,483
Total credit exposures2	13,713	8,761	7,579	19,332	21,998	71,442	66,582	1,075,364

1 SME retail business lending secured by residential property has been allocated by industry.

2 Total credit risk exposures do not include equities or securitisation exposures.

3 Property includes REITs and excludes Business Services.

Commonwealth Bank of Australia – Pillar 3 Report 19

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APS 330 Table 7d – Credit risk exposure by portfolio type and industry sector (continued)

Portfolio Type	31 December 2019
	Residential Other Asset Other mortgage personal finance Sovereign Bank finance Agriculture Mining $M $M $M $M $M $M $M $M Industry Sector

Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets	– – 3,624 – – 26,270 2,970 8,801 – – 3,101 – – 1,666 17,438 143 – – 3,290 – – 357 1,787 116 – – – 91,183 – – – – – – – – 27,128 – – – 605,434 – – – – – – – – 26,679 – – – – – – – 11,552 354 – – – – – – – 13 – – – 1 1,244 – 2,570 – – – – – –
Central counterparties	– – – – 978 8,036 – –
Total credit exposures 2	605,434 40,801 10,382 91,183 28,106 36,329 22,196 10,304

				Industry Sector(continued)	Industry Sector(continued)
				Retail/
				wholesale	Transport
	Manufacturing	Energy	Construction	trade	and storage	Property3	Other	Total
Portfolio Type	$M	$M	$M	$M	$M	$M	$M	$M
Corporate	9,976	6,439	2,931	9,427	15,994	11,144	25,290	122,866
SME corporate	2,965	174	2,626	7,679	1,462	244	15,082	52,580
SME retail1	846	17	1,629	2,513	458	2,339	7,441	20,793
Sovereign	–	–	–	–	–	–	–	91,183
Bank	–	–	–	–	–	–	–	27,128
Residential mortgage	–	–	–	–	–	–	–	605,434
Qualifying revolving retail	–	–	–	–	–	–	–	26,679
Other retail	–	–	–	–	–	–	–	11,906
Specialised lending	63	2,312	–	261	2,354	55,966	2,016	64,230
Other assets	–	–	–	–	–	–	14,108	16,678
Central counterparties	–	–	–	–	–	–	–	9,014
Total credit exposures2	13,850	8,942	7,186	19,880	20,268	69,693	63,937	1,048,491

1 SME retail business lending secured by residential property has been allocated by industry.

2 Total credit risk exposures do not include equities or securitisation exposures. 3 Property includes REITs and excludes Business Services.

20 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 7e – Credit risk exposure by portfolio type and residual contractual maturity

Portfolio Type	31 December 2020
	No specified ≤ 12mths 1 ≤ 5yrs > 5 years maturity Total $M $M $M $M $M
Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets Central counterparties	45,912 71,929 7,046 – 124,887 20,605 31,171 3,388 – 55,164 6,991 7,829 4,739 – 19,559 57,635 39,780 42,652 – 140,067 10,868 14,169 345 – 25,382 23,496 85,323 496,818 32,944 638,581 – – – 24,626 24,626 271 4,568 1,851 3,998 10,688 21,884 41,799 5,014 – 68,697 12,591 187 273 10,357 23,408 5,055 4,146 1,440 – 10,641
Total credit exposures 2	205,308 300,901 563,566 71,925 1,141,700

1 Including SME retail secured by residential property.
2 Total credit risk exposures do not include equities or securitisation exposures.

Portfolio Type	30 June 2020
	No specified ≤ 12mths 1 ≤ 5yrs > 5 years maturity Total $M $M $M $M $M

Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets Central counterparties	41,685 72,492 9,747 – 123,924 20,217 28,909 3,471 – 52,597 7,228 8,009 4,805 – 20,042 39,371 34,964 34,354 – 108,689 8,839 13,822 1,837 – 24,498 22,436 81,781 476,327 34,071 614,615 – – – 25,309 25,309 185 4,577 2,174 4,039 10,975 19,948 40,390 6,095 – 66,433 5,643 325 470 11,361 17,799 4,231 3,479 2,773 – 10,483
Total credit exposures 2	169,783 288,748 542,053 74,780 1,075,364

1 Including SME retail secured by residential property. 2 Total credit risk exposures do not include equities or securitisation exposures.

Portfolio Type	31 December 2019
	No specified ≤ 12mths 1 ≤ 5yrs > 5 years maturity Total $M $M $M $M $M

Corporate SME corporate SME retail1 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail Specialised lending Other assets Central counterparties	41,511 69,508 11,847 – 122,866 20,812 28,031 3,737 – 52,580 7,308 7,623 5,862 – 20,793 25,440 33,310 32,433 – 91,183 11,539 14,012 1,577 – 27,128 17,966 63,184 487,644 36,640 605,434 – – – 26,679 26,679 202 4,840 2,636 4,228 11,906 20,060 38,741 5,429 – 64,230 4,916 364 511 10,887 16,678 3,477 4,284 1,253 – 9,014
Total credit exposures 2	153,231 263,897 552,929 78,434 1,048,491

1 Including SME retail secured by residential property. 2 Total credit risk exposures do not include equities or securitisation exposures.

Commonwealth Bank of Australia – Pillar 3 Report 21

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All provisions recognised in accordance with accounting standards that have been assessed on an individual basis are classified as specific provisions in accordance with APS 220 “Credit Quality” (APS 220). Most of the collective provisions raised under accounting standards are included in the General Reserve for Credit Losses (GRCL); however, certain collective provisions not eligible for inclusion in the GRCL, are classified as specific provisions. This includes, for example, collective provisions on retail products that are in default. Effective 31 December 2019, the Group’s GRCL methodology results in an amount lower than the provision recognised for accounting purposes, resulting in no additional GRCL requirement.

Reconciliation of Australian Accounting Standards and APS 220 based credit provisions and APS 330 Table 7j – General reserve for credit losses

reserve for credit losses
	31 December 2020
	General reserve for Specific Total credit losses 1 provision 1 provisions
	$M $M $M
Collective provision2 Individualprovisions2	5,274 669 5,943 – 872 872
Total regulatory provisions	5,274 1,541 6,815

1 Provisions classified according to APS 220.

2 Provisions according to Australian Accounting Standards.

	30 June 2020
	General reserve for Specific Total credit losses 1 provision 1 provisions
	$M $M $M
Collective provision2 Individualprovisions2	4,902 494 5,396 – 967 967
Total regulatory provisions	4,902 1,461 6,363

1 Provisions classified according to APS 220.

2 Provisions according to Australian Accounting Standards.

	31 December 2019
	General reserve for Specific Total credit losses 1 provision 1 provisions
	$M $M $M
Collective provision2 Individualprovisions2	3,663 404 4,067 – 959 959
Total regulatory provisions	3,663 1,363 5,026

1 Provisions classified according to APS 220. 2 Provisions according to the Australian Accounting Standards.

22 Commonwealth Bank of Australia – Pillar 3 Report

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The following tables provide a summary of the Group’s financial losses by portfolio type, industry and geography.

APS 330 Table 7f (i) – Impaired, past due, specific provisions and write-offs charged by industry sector

	31 December 2020
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Industry Sector	$M $M $M $M $M
Home loans Other personal Asset finance Sovereign Bank Other finance Agriculture Mining Manufacturing Energy Construction Wholesale/retail trade Transport and storage Property Other	1,451 2,504 581 9 36 212 18 263 (1) 225 141 3 39 2 8 – – – – – – – – – – 4 6 5 – 3 235 76 63 (5) 7 121 2 35 (5) – 253 36 147 52 70 – – – – – 61 30 31 (9) 5 141 82 88 48 21 90 24 70 18 12 74 120 64 3 4 317 221 155 2 42
Total	3,100 3,122 1,541 114 433

1 Represents loans ≥ 90 days past due but not impaired.

2 Specific provision balance includes certain Australian Accounting Standards collective provisions on some defaulted loans. 3 Actual losses equal write-offs from individual provisions and write-offs direct from collective provisions less recoveries of amounts previously written off, for the half year ended 31 December 2020.

Commonwealth Bank of Australia – Pillar 3 Report 23

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APS 330 Table 7f (i) – Impaired, past due, specific provisions and write-offs charged by industry sector (continued)

	30 June 2020
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Industry Sector	$M $M $M $M $M

Home loans Other personal Asset finance Sovereign Bank Other finance Agriculture Mining Manufacturing Energy Construction Wholesale/retail trade Transport and storage Property Other	1,673 2,710 424 27 61 279 45 278 5 270 121 4 45 2 6 – – – – – – – – 2 – 6 8 5 1 2 249 85 73 4 5 164 4 38 7 1 261 48 183 58 10 – – – – – 63 39 41 (8) 33 143 86 69 38 59 184 17 63 49 21 78 128 63 5 4 327 187 179 82 82
Total	3,548 3,361 1,461 272 554

1 Represents loans ≥ 90 days past due but not impaired.

24 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 7f (i) – Impaired, past due, specific provisions and write-offs charged by industry sector (continued)

	31 December 2019
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Industry Sector	$M $M $M $M $M

Home loans Other personal Asset finance Sovereign Bank Other finance Agriculture Mining Manufacturing Energy Construction Wholesale/retail trade Transport and storage Property Other	1,854 2,479 420 55 55 243 28 238 1 282 73 1 22 15 11 – – – – – – – – (9) – 6 6 4 1 3 325 79 78 – 28 108 2 29 – 13 208 35 150 87 4 – – – – – 93 34 82 6 3 121 111 90 42 19 65 20 28 2 1 69 169 59 – 5 218 190 163 3 44
Total	3,383 3,154 1,363 203 468

1 Represents loans ≥ 90 days past due but not impaired.

2 Specific provision balance includes certain Australian Accounting Standards collective provisions on some defaulted loans.

3 Actual losses equal write-offs from individual provisions and write-offs direct from collective provisions less recoveries of amounts previously written off, for the half year ended 31 December 2019.

Factors impacting the loss experience

The overall quality of the portfolio was relatively stable during the half year ended 31 December 2020. Gross impaired assets as a proportion of gross loans and advances (GLAAs) decreased by 7 basis points during the financial half year ended 31 December 2020. Total provisions as a proportion of GLAAs increased by 4 basis points to 0.86%, mainly driven by increases in forward looking adjustments predominantly due to COVID-19. Group actual losses decreased by $121 million on the prior half led by a reduction in losses for the retail portfolios.

Commonwealth Bank of Australia – Pillar 3 Report 25

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APS 330 Table 7f (ii) – Impaired, past due, specific provisions and write-offs charged by portfolio

	31 December 2020
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Portfolio	$M $M $M $M $M
Corporate including SME, specialised lending and central counterparties Sovereign Bank Residential mortgage Qualifying revolving retail	1,437 600 697 106 172 – – – – – – – – – – 1,451 2,504 581 9 36 87 – 86 (3) 111
Other retail	125 18 177 2 114
Total	3,100 3,122 1,541 114 433

1 Represents loans ≥ 90 days past due but not impaired.
2 Specific provision balance includes certain accounting collective provisions on some defaulted loans.
3 Actual losses equal write-offs from individual provisions and write-offs direct from collective provisions less recoveries of amounts previously written off for the half year ended 31 December 2020.

	30 June 2020
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Portfolio	$M $M $M $M $M

Corporate including SME, specialised lending and central counterparties Sovereign Bank Residential mortgage Qualifying revolving retail	1,596 606 759 238 223 – – – – – – – – 2 – 1,673 2,710 424 27 61 143 – 114 1 107
Other retail	136 45 164 4 163
Total	3,548 3,361 1,461 272 554

1 Represents loans ≥ 90 days past due but not impaired.
2 Specific provision balance includes certain accounting collective provisions on some defaulted loans.

3 Actual losses equal write-offs from individual provisions and write-offs direct from collective provisions less recoveries of amounts previously written off for the half year ended 30 June 2020.

	31 December 2019
	Net half year
	Past due Specific charges for Half year Impaired loans provision individual actual assets ≥ 90 days 1 balance2 provisions losses3
Portfolio	$M $M $M $M $M

Corporate including SME, specialised lending and central counterparties Sovereign Bank Residential mortgage Qualifying revolving retail	1,286 647 705 156 131 – – – – – – – – (9) – 1,854 2,479 420 55 55 108 – 93 (1) 118
Other retail	135 28 145 2 164
Total	3,383 3,154 1,363 203 468

1 Represents loans ≥ 90 days past due but not impaired.
2 Specific provision balance includes certain accounting collective provisions on some defaulted loans. 3 Actual losses equal write-offs from individual provisions and write-offs direct from collective provisions less recoveries of amounts previously written off for the half year ended 31 December 2019.

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APS 330 Table 7g (i) – Impaired, past due and specific provisions by geographic region

APS 330 Table 7g (i) – Impaired, past due and specific provisions by geographic region
	31 December 2020
	Past due Specific Impaired loans provision assets ≥ 90 days 2 balance
Geographic Region1	$M $M $M
Australia New Zealand Other	2,199 2,927 1,244 524 190 145 377 5 152
Total	3,100 3,122 1,541

1 Balances reported based on the risk domicile of the borrower. The Group’s financial statements disclose balances based on the domicile of the lending entity. 2 Represents loans ≥ 90 days past due but not impaired.

	30 June 2020
	Past due Specific Impaired loans provision assets ≥ 90 days 2 balance
Geographic Region1	$M $M $M

Australia New Zealand Other	2,416 3,061 1,078 681 223 196 451 77 187
Total	3,548 3,361 1,461

	31 December 2019
	Past due Specific Impaired loans provision assets ≥ 90 days 2 balance
Geographic Region1	$M $M $M

Australia New Zealand Other	2,523 2,994 1,146 573 103 80 287 57 137
Total	3,383 3,154 1,363

1 Balances reported based on the risk domicile of the borrower. The Group’s financial statements disclose balances based on the domicile of the lending entity.

2 Represents loans ≥ 90 days past due but not impaired.

The Group’s GRCL (before tax) by geographic region is distributed as follows:

APS 330 Table 7g (ii) – GRCL by geographic region

APS 330 Table 7g (ii) – GRCL by geographic region
	31 Dec 20	30 Jun 20	31 Dec 19
Geographic Region	$M	$M	$M
Australia	4,524	4,160	3,164
New Zealand	464	417	294
Other	286	325	205
Total GRCL	5,274	4,902	3,663

Commonwealth Bank of Australia – Pillar 3 Report 27

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APS 330 Table 7h (i) – Movement in collective provisions and general reserve for credit losses

APS 330 Table 7h (i) – Movement in collective provisions and general reserve for credit	losses
	Half Year Ended
Movement in Collective Provisions	31 Dec 20 30 Jun 20 31 Dec 19 $M $M $M
Opening balance	5,396 4,067 3,904
Net charge against profit and loss Recoveries Other Write-offs	768 1,598 446 69 84 101 10 4 22 (300) (357) (406)
Total collective provisions Less collectiveprovisions transferred to specificprovisions	5,943 5,396 4,067 (669) (494) (404)
General reserve for credit losses	5,274 4,902 3,663

APS 330 Table 7h (ii) – Movement in individual provisions and specific provisions

APS 330 Table 7h (ii) – Movement in individual provisions and specific provisions
	Half Year Ended
Movement in Individual Provisions	31 Dec 20 30 Jun 20 31 Dec 19 $M $M $M
Opening balance for the period	967 959 895
Net new and increased provisioning Net write back of provisions no longer required Discount unwind to interest income Other	236 371 287 (122) (99) (84) (7) (5) (11) – 22 35
Write-offs	(202) (281) (163)
Total individual provisions	872 967 959
Add collectiveprovisions transferred to specificprovisions	669 494 404
Specificprovisions	1,541 1,461 1,363

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The standardised approach is also used by the Group where portfolios or segments are considered as immaterial by the size of exposure or where APRA requires a standardised approach to be used.

Portfolios that use the standardised approach include:

CBA:  Some unsecured consumer retail (personal cheque  Some retail SMEs (overdrawn accounts); accounts).  Non-rated corporate exposures; ASB:  Some residential mortgages (including purchased portfolios  Personal loans and Retail SME. and reverse mortgages); All exposures in the following entities:
Margin lending;  CBE;  Non-recourse purchased receivables; and  PTBC; and  Central counterparties.  CBA Europe N.V. Bankwest:
Some residential mortgages (equity lines of credit); and

APS 330 Table 8b – Exposures subject to standardised and supervisory risk weights

APS 330 Table 8b – Exposures subject to standardised and supervisory risk weights
	Exposure after credit risk mitigation1
Standardised Approach Exposures	31 Dec 20 30 Jun 20 31 Dec 19 $M $M $M
Risk Weight
0% 20% 35% 50% 75% 100% 150% > 150% Capital deductions	12,544 5,115 4,400 3,610 3,385 3,537 9,887 10,156 9,249 3,971 3,808 3,833 790 846 864 14,202 16,176 17,866 39 42 10 1 – – – – –
Total	45,044 39,528 39,759

1 Exposure after credit risk mitigation does not include central counterparties, equity or securitisation exposures.

28 Commonwealth Bank of Australia – Pillar 3 Report

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Other Assets risk weights

Other Assets risk weights
	31 December 2020
	Exposure Risk weight RWA
Other Assets1	$M % $M
Cash2 Cash items in course of collection Margin lending3 Fixed and forward purchase assets Other	12,544 – – 945 20 189 2,263 29 653 4,477 100 4,477 3,179 ≥100 3,185
Total	23,408 36 8,504

1 Other Assets are included in the Standardised Approach Exposures table above.
2 Includes cash and allocated gold bullion.
3 Margin lending against listed instruments is risk weighted at 20%, and against other unlisted instruments is risk weighted at 100%.

	30 June 2020
	Exposure Risk weight RWA
Other Assets1	$M % $M

Cash2 Cash items in course of collection Margin lending3 Fixed and forward purchase assets Other	5,109 – – 976 20 195 2,309 29 681 4,429 100 4,429 4,976 ≥100 4,976
Total	17,799 58 10,281

1 Other Assets are included in the Standardised Approach Exposures table above.
2 Includes cash and allocated gold bullion.
3 Margin lending against listed instruments is risk weighted at 20%, and against other unlisted instruments is risk weighted at 100%.

	31 December 2019
	Exposure Risk weight RWA
Other Assets1	$M % $M

Cash2 Cash items in course of collection Margin lending3 Fixed and forward purchase assets Other	4,394 – – 897 20 179 2,570 29 755 3,836 100 3,836 4,981 ≥100 4,982
Total	16,678 58 9,752

1 Other Assets are included in the Standardised Approach Exposures table above.

2 Includes cash and allocated gold bullion.

3 Margin lending against listed instruments is risk weighted at 20%, and against other unlisted instruments is risk weighted at 100%.

	31 Dec 20	30 Jun 20	31 Dec 19
Specialised Lending Exposures Subject to Supervisory Slotting1	$M	$M	$M
Risk Weight
0%	473	313	367
70%	20,266	18,873	18,942
90%	41,293	39,804	39,391
115%	5,835	6,690	4,824
250%	830	753	706
Total exposures	68,697	66,433	64,230

1 APRA requires specialised lending exposures including Income Producing Real Estate, Object and Project Finance to be assigned specific risk weights according to “slotting” criteria defined by the Regulator.

Commonwealth Bank of Australia – Pillar 3 Report 29

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The Group’s mapping of internal rating scales for risk-rated exposure to external rating agencies is detailed in APS 330 table 9b below.

APS 330 Table 9b – Internal ratings structure for credit risk exposures and mapping to external ratings

Description	Internal Rating	Probability of Default	S&P Rating	Moody’s Rating
Exceptional	A0 to A3	0% - 0.035%	AAA to AA-	Aaa to Aa3
Strong	B1 to C3	>0.035% - 0.446%	A+ to BBB-	A1 to Baa3
Pass	D1 to E3	>0.446% - 6.656%	BB+ to B-	Ba1 to B3
Weak/Doubtful	F1 to G3	>6.656%	CCC to C	Caa to Ca
Restructured	R	30.998%	-	-
Defaulted	H	100%	D	C

APS 330 Table 9c – PD rating methodology by portfolio segment

Portfolio Segment	PD Rating Methodology
Bank and sovereign exposures	Expert judgement assigned risk rating, informed but not driven by
	rating agency views.
Large corporate exposures	Combination of expert judgement and PD Rating Tool assigned risk
	ratings depending on the industry sector.
SME corporate exposures	PD Rating Tool and expert judgement assigned risk rating.
SME retail exposures < $1m	SME behaviour score assigned PD pools.
Consumer retail exposures (including residential mortgages,	Depending on the product, PD pools are assigned using product
qualifying revolving credit and other retail)	specific application scorecards, behavioural scorecards, payment
	status or a combination thereof.

30 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 9d (i) – Non-retail exposures by portfolio type and PD band

	31 December 2020
	0 < 0.03% 0.03% < 0.15% 0.15% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Non-retail1	$M $M $M $M $M $M $M $M
Total credit risk exposures Corporate SME corporate SME retail2 Sovereign Bank	– 40,615 43,430 36,754 809 1,211 874 123,693 – 762 3,994 43,963 2,668 1,965 1,060 54,412 – – 1,576 11,089 3,436 518 286 16,905 111,366 27,562 543 1 – – – 139,472 – 23,449 1,233 34 – – – 24,716
Total	111,366 92,388 50,776 91,841 6,913 3,694 2,220 359,198
Undrawn commitments3 Corporate SME corporate SME retail2 Sovereign Bank	– 17,075 18,156 12,576 329 213 169 48,518 – 207 1,057 8,656 413 172 61 10,566 – – 1,420 3,850 787 85 21 6,163 893 214 43 1 – – – 1,151 – 307 96 1 – – – 404
Total	893 17,803 20,772 25,084 1,529 470 251 66,802
Exposure - weighted average EAD ($M)
Corporate SME corporate SME retail2 Sovereign Bank Exposure - weighted average LGD (%) Corporate SME corporate SME retail2 Sovereign Bank Exposure - weighted average risk weight (%)4 Corporate SME corporate SME retail2 Sovereign Bank	– 2. 905 1. 795 0. 944 0. 506 1. 025 1. 608 1. 538 – 0. 471 0. 492 0. 497 0. 448 0. 438 0. 491 0. 491 – – 0. 100 0. 065 0. 053 0. 099 0. 128 0. 066 7. 941 36. 750 1. 394 0. 043 – – – 9. 172 – 1. 985 0. 588 0. 178 – – – 1. 750 – 55. 4 45. 7 41. 1 43. 7 43. 1 53. 4 47.5 – 52. 9 30. 8 28. 0 30. 3 31. 8 33. 8 28. 9 – – 41. 3 32. 5 42. 1 32. 8 32. 7 35. 3 5. 6 9. 9 42. 8 25. 4 – – – 6. 6 – 59. 2 60. 0 60. 0 – – – 59. 3 – 27. 2 52. 1 82. 3 161. 7 223. 0 141. 3 55. 9 – 20. 4 30. 3 50. 8 84. 3 147. 0 173. 1 56. 4 – – 28. 1 44. 7 88. 2 113. 1 227. 3 57. 2 1. 6 2. 7 34. 7 46. 2 – – – 1. 9 – 24. 2 58. 4 114. 8 – – – 26. 0

1 Total credit risk exposures do not include specialised lending, equity or securitisation exposures.
2 Including SME retail secured by residential property. 3 The credit exposure value of undrawn commitments included in total credit risk exposures above.
4 Includes 1.06 scaling factor.

Commonwealth Bank of Australia – Pillar 3 Report 31

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APS 330 Table 9d (i) – Non-retail exposures by portfolio type and PD band (continued)

	30 June 2020
	0 < 0.03% 0.03% < 0.15% 0.15% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Non-retail 1	$M $M $M $M $M $M $M $M

Total credit risk exposures Corporate SME corporate SME retail2 Sovereign	– 42,063 45,158 32,828 671 1,297 950 122,967 – 753 4,078 41,581 2,234 1,996 1,214 51,856 – – 1,205 11,846 3,187 569 315 17,122 95,304 12,597 218 5 – – – 108,124
Bank	– 22,506 1,648 20 – – – 24,174
Total	95,304 77,919 52,307 86,280 6,092 3,862 2,479 324,243
Undrawn commitments3 Corporate SME corporate SME retail2 Sovereign Bank	– 18,558 16,964 9,664 244 261 135 45,826 – 135 937 6,995 264 157 68 8,556 – – 1,038 3,805 677 73 17 5,610 856 225 36 2 – – – 1,119 – 308 95 1 – – – 404
Total	856 19,226 19,070 20,467 1,185 491 220 61,515
Exposure - weighted average EAD ($M)	– 3. 038 1. 936 0. 866 0. 425 0. 887 1. 923 1. 564 – 0. 563 0. 498 0. 480 0. 395 0. 413 0. 490 0. 475
Corporate SME corporate
SME retail2 Sovereign Bank Exposure - weighted average LGD (%) Corporate SME corporate SME retail2 Sovereign Bank Exposure - weighted average risk weight (%)4,5 Corporate SME corporate SME retail2 Sovereign	– – 0. 077 0. 056 0. 067 0. 079 0. 088 0. 060 7. 108 18. 283 0. 697 0. 123 – – – 7. 475 – 1. 909 0. 724 0. 077 – – – 1. 687 – 55. 5 47. 2 42. 1 40. 9 48. 8 51. 2 48. 7 – 56. 9 31. 3 28. 7 30. 4 31. 3 32. 9 29. 6 – – 40. 5 32. 7 40. 0 29. 5 33. 3 34. 5 5. 7 12. 6 44. 4 48. 4 – – – 6. 6 – 59. 5 60. 0 60. 0 – – – 59. 5 – 27. 6 53. 3 86. 8 152. 7 263. 0 103. 2 56. 6 – 24. 5 31. 1 53. 3 88. 4 146. 2 197. 5 59. 6 – – 27. 8 45. 8 87. 1 110. 7 272. 9 58. 6 1. 5 2. 5 33. 3 131. 2 – – – 1. 7
Bank	– 25. 2 58. 5 125. 6 – – – 27. 6

1 Total credit risk exposures do not include specialised lending, equity or securitisation exposures.
2 Including SME retail secured by residential property.
3 The credit exposure value of undrawn commitments included in total credit risk exposures above.
4 Includes 1.06 scaling factor.
5 In June 2020, AASB 9 collective provisions were included in the calculation of credit RWA for defaulted non-retail exposures. This change in methodology was approved by APRA.

32 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 9d (i) – Non-retail exposures by portfolio type and PD band (continued)

	31 December 2019
	0 < 0.03% 0.03% < 0.15% 0.15% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Non-retail 1	$M $M $M $M $M $M $M $M

Total credit risk exposures Corporate SME corporate	– 44,764 44,898 29,891 620 797 587 121,557 – 619 4,019 41,597 2,232 2,009 1,348 51,824
SME retail2 Sovereign Bank	– – 1,023 11,610 2,940 439 199 16,211 80,550 9,924 222 12 – – – 90,708 – 24,853 1,953 3 – – – 26,809
Total	80,550 80,160 52,115 83,113 5,792 3,245 2,134 307,109
Undrawn commitments3 Corporate SME corporate SME retail2 Sovereign Bank	– 17,583 17,914 8,376 205 153 36 44,267 – 88 942 6,876 246 159 87 8,398 – – 911 3,664 480 63 11 5,129 806 388 29 2 – – – 1,225 – 291 86 – – – – 377
Total	806 18,350 19,882 18,918 931 375 134 59,396
Exposure - weighted average EAD ($M)	– 2. 920 1. 973 0. 796 0. 454 0. 633 2. 198 1. 548 – 0. 465 0. 538 0. 478 0. 410 0. 375 0. 466 0. 473
Corporate SME corporate
SME retail2 Sovereign Bank Exposure - weighted average LGD (%) Corporate SME corporate SME retail2 Sovereign Bank Exposure - weighted average risk weight (%)4 Corporate SME corporate SME retail2 Sovereign	– – 0. 072 0. 055 0. 077 0. 066 0. 071 0. 060 6. 876 9. 506 0. 519 0. 090 – – – 6. 810 – 1. 946 0. 678 0. 043 – – – 1. 705 – 54. 9 46. 9 41. 4 37. 9 45. 3 57. 3 48. 5 – 58. 1 30. 4 28. 7 30. 6 31. 5 33. 0 29. 5 – – 37. 2 31. 6 36. 7 31. 0 38. 0 33. 0 5. 7 12. 4 52. 8 49. 4 – – – 6. 6 – 59. 6 60. 0 60. 0 – – – 59. 7 – 29. 8 54. 6 85. 1 139. 6 244. 6 195. 8 55. 3 – 28. 0 30. 6 52. 7 88. 8 146. 1 246. 8 60. 9 – – 26. 0 45. 3 84. 7 107. 5 405. 4 57. 3 1. 6 2. 9 33. 0 106. 6 – – – 1. 9
Bank	– 27. 4 59. 3 99. 1 – – – 29. 7

1 Total credit risk exposures do not include specialised lending, equity or securitisation exposures.
2 Including SME retail secured by residential property. 3 The credit exposure value of undrawn commitments included in total credit risk exposures above.
4 Includes 1.06 scaling factor.

Commonwealth Bank of Australia – Pillar 3 Report 33

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APS 330 Table 9d (ii) – Retail exposures by portfolio type and PD band

	31 December 2020
	0 < 0.1% 0.1% < 0.3% 0.3% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Retail	$M $M $M $M $M $M $M $M
Total credit risk exposures Residential mortgage Qualifying revolving retail Other retail	198,208 122,221 71,882 208,809 11,290 6,924 4,476 623,810 – 15,132 3,436 4,218 1,558 222 60 24,626 50 56 48 5,773 3,111 522 124 9,684
Total	198,258 137,409 75,366 218,800 15,959 7,668 4,660 658,120
Undrawn commitments1 Residential mortgage Qualifying revolving retail Other retail	44,717 14,620 8,504 11,977 176 60 15 80,069 – 11,905 2,567 1,755 242 32 1 16,502 45 10 34 2,580 260 89 4 3,022
Total	44,762 26,535 11,105 16,312 678 181 20 99,593
Exposure - weighted average EAD ($M) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average LGD (%) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average risk weight (%)2	0. 278 0. 295 0. 273 0. 279 0. 274 0. 228 0. 278 0. 280 – 0. 009 0. 007 0. 008 0. 008 0. 007 0. 007 0. 008 0. 004 0. 373 0. 005 0. 007 0. 010 0. 002 0. 005 0. 006 20. 0 19. 7 19. 4 20. 4 21. 2 19. 8 20. 3 20. 0 – 84. 8 84. 2 84. 5 84. 2 83. 9 84. 6 84. 6 107. 8 99. 6 106. 2 88. 3 83. 3 90. 5 86. 6 87. 0
Residential mortgage Qualifying revolving retail	4. 4 12. 8 20. 6 41. 2 101. 7 134. 6 135. 2 24. 4 – 5. 6 13. 9 44. 2 128. 5 211. 6 267. 9 23. 6
Other retail	26. 7 43. 3 70. 5 105. 9 129. 3 194. 1 235. 5 118. 9

1 The credit exposure value of undrawn commitments included in total credit risk exposures above.

2 Includes 1.06 scaling factor.

34 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 9d (ii) – Retail exposures by portfolio type and PD band (continued)

	30 June 2020
	0 < 0.1% 0.1% < 0.3% 0.3% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Retail	$M $M $M $M $M $M $M $M

Total credit risk exposures Residential mortgage Qualifying revolving retail	189,231 118,352 68,379 199,934 11,866 6,972 4,779 599,513 – 14,548 3,652 4,758 1,904 335 112 25,309
Other retail	52 42 47 5,499 3,459 624 132 9,855
Total	189,283 132,942 72,078 210,191 17,229 7,931 5,023 634,677
Undrawn commitments1 Residential mortgage Qualifying revolving retail	41,773 13,894 6,864 10,102 162 59 17 72,871 – 12,022 2,801 1,954 302 37 1 17,117
Other retail	47 3 35 2,692 273 85 4 3,139
Total	41,820 25,919 9,700 14,748 737 181 22 93,127
Exposure - weighted average EAD ($M) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average LGD (%) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average risk weight (%)2,3	0. 280 0. 293 0. 269 0. 271 0. 272 0. 226 0. 266 0. 277 – 0. 009 0. 007 0. 008 0. 008 0. 008 0. 009 0. 008 0. 004 0. 349 0. 005 0. 006 0. 010 0. 002 0. 004 0. 006 20. 0 19. 7 19. 4 20. 3 21. 1 19. 8 20. 3 20. 0 – 84. 8 84. 3 84. 5 84. 2 84. 1 84. 5 84. 6 107. 8 99. 5 106. 5 92. 0 85. 3 89. 3 88. 0 89. 6
Residential mortgage Qualifying revolving retail	4. 4 12. 6 20. 4 41. 4 101. 0 133. 9 149. 8 24. 7 – 5. 5 13. 9 44. 9 128. 1 207. 6 102. 3 26. 6
Other retail	26. 6 45. 0 70. 4 110. 5 132. 8 192. 6 145. 1 123. 0

1 The credit exposure value of undrawn commitments included in total credit risk exposures above.
2 Includes 1.06 scaling factor.
3 In June 2020, all components of AASB 9 collective provisions were included in the calculation of credit RWA for defaulted retail exposures. This change in methodology was approved by APRA.

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APS 330 Table 9d (ii) – Retail exposures by portfolio type and PD band (continued)

	31 December 2019
	0 < 0.1% 0.1% < 0.3% 0.3% < 0.5% 0.5% < 3% 3% < 10% 10% < 100% Default Total PD Band
Retail	$M $M $M $M $M $M $M $M

Total credit risk exposures Residential mortgage Qualifying revolving retail	185,385 112,505 73,264 184,634 24,883 5,708 4,639 591,018 195 14,781 3,661 5,445 2,099 405 93 26,679
Other retail	51 37 53 5,819 3,987 602 133 10,682
Total	185,631 127,323 76,978 195,898 30,969 6,715 4,865 628,379
Undrawn commitments1 Residential mortgage Qualifying revolving retail	40,378 14,529 5,990 11,674 275 59 17 72,922 162 11,548 2,661 1,996 291 44 – 16,702
Other retail	46 5 36 2,622 263 97 3 3,072
Total	40,586 26,082 8,687 16,292 829 200 20 92,696
Exposure - weighted average EAD ($M) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average LGD (%) Residential mortgage Qualifying revolving retail Other retail Exposure - weighted average risk weight (%)2	0. 278 0. 291 0. 273 0. 268 0. 284 0. 214 0. 263 0. 276 0. 004 0. 009 0. 008 0. 009 0. 008 0. 008 0. 008 0. 009 0. 004 0. 381 0. 005 0. 006 0. 010 0. 001 0. 004 0. 006 20. 0 19. 7 19. 4 20. 3 20. 5 19. 8 20. 3 20. 0 81. 0 84. 9 84. 2 84. 3 84. 7 84. 0 84. 6 84. 6 108. 1 99. 4 105. 8 91. 9 85. 4 90. 7 88. 0 89. 5
Residential mortgage	4. 4 13. 1 20. 2 39. 0 89. 7 133. 7 173. 5 25. 0
Qualifying revolving retail Other retail	3. 2 5. 5 13. 7 45. 8 135. 9 213. 8 298. 5 29. 3 27. 2 45. 0 70. 0 111. 0 133. 0 194. 1 370. 7 126. 3

1 The credit exposure value of undrawn commitments included in total credit risk exposures above.
2 Includes 1.06 scaling factor.

36 Commonwealth Bank of Australia – Pillar 3 Report

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Analysis of Losses

The following tables provide a summary of financial losses by AIRB portfolio (APS 330 Table 9e) and a comparison of financial losses to regulatory Expected Loss (EL) estimates (APS 330 Table 9f (i)).

APS 330 Table 9e – Actual losses by portfolio type

	31 December 2020
	Gross Actual write-offs Recoveries losses Half year losses in reporting period
Portfolio Type	$M $M $M
Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	82 – 82 41 (1) 40 21 (1) 20 2 – 2
Total corporate including SME and specialised lending Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail Other retail	146 (2) 144 – – – – – – 39 (3) 36 141 (30) 111 130 (29) 101
Total AIRB and specialised lending portfolios	456 (64) 392

	30 June 2020
	Gross Actual write-offs Recoveries losses Full year losses in reporting period
Portfolio Type	$M $M $M

Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	134 – 134 121 (9) 112 64 (6) 58 9 – 9
Total corporate including SME and specialised lending Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail Other retail	328 (15) 313 – – – – – – 121 (5) 116 305 (80) 225 367 (76) 291
Total AIRB and specialised lending portfolios	1,121 (176) 945

	31 December 2019
	Gross Actual write-offs Recoveries losses Half year losses in reporting period
Portfolio Type	$M $M $M

Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	22 – 22 58 (4) 54 33 (2) 31 7 – 7
Total corporate including SME and specialised lending Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail Other retail	120 (6) 114 – – – – – – 57 (3) 54 170 (45) 125 185 (42) 143
Total AIRB and specialised lending portfolios	532 (96) 436

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APS 330 Table 9f (i) – Historical loss analysis by portfolio type

APS 330 Table 9f (i) – Historical loss analysis by portfolio type
	31 December 2020
	Regulatory one year Half year expected loss
	actual loss estimate
Portfolio Type	$M $M
Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	82 931 40 661 20 215 2 878
Total corporate including SME and specialised lending	144 2,685
Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail Other retail	– 3 – 7 36 1,574 111 269 101 415
Total AIRB and specialised lending portfolios	392 4,953

	30 June 2020
	Regulatory one year Full year expected loss
	actual loss estimate
Portfolio Type	$M $M
Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	134 972 112 672 58 208 9 798
Total corporate including SME and specialised lending	313 2,650
Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail Other retail	– 2 – 7 116 1,395 225 376 291 480
Total AIRB and specialised lending portfolios	945 4,910

	31 December 2019
	Regulatory one year Half year expected loss
	actual loss estimate
Portfolio Type	$M $M
Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending	22 669 54 679 31 158 7 766
Total corporate including SME and specialised lending	114 2,272
Sovereign Bank Residential mortgage (excluding SME retail secured by residential mortgages) Qualifying revolving retail	– 2 – 9 54 1,283 125 393
Other retail	143 481
Total AIRB and specialised lending portfolios	436 4,440

Actual losses may differ from modelled regulatory EL for a number of reasons.

Actual losses (whether from standardised or AIRB portfolios) are historical and are based on the quality of impaired assets in prior periods, full or partial write-offs, and more recent economic conditions. Actual losses are expected to be below the regulatory EL estimate in most years.

Regulatory EL measures economic loss at a point in time and includes costs (such as internal costs) not included in actual losses. Regulatory EL is calculated on non-defaulted and defaulted AIRB exposures using long-run PDs and downturn LGDs for non-defaulted exposures, and the Best Estimate of Expected Loss (BEEL) for defaulted exposures.

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Accuracy of Risk Estimates

The following tables compare credit risk estimates used in calculating regulatory capital to realised outcomes.

Probability of Default

APS 330 Table 9f (ii) compares estimates of long-run PD to actual default rates averaged over 12.5 financial years to 31 December 2020.

Average estimated PD is based on the average of long-run PD’s for obligors that are not in default at the beginning of each financial year in the observation period. Actual PD is based on the number of defaulted obligors during the year compared to the non-defaulted obligors measured at the beginning of each financial year.

APS 330 Table 9f (ii) – Accuracy of risk estimates – PD

APS 330 Table 9f (ii) – Accuracy of risk estimates – PD
	31 December 2020
	Average Average estimated PD actual PD
Portfolio Type	% %
Corporate SME corporate SME retail (including SME retail secured by residential mortgages)1 Specialised lending2 Sovereign3 Bank3 Residential mortgage (excluding SME retail secured by residential mortgages)	1. 30 0. 89 2. 27 1. 99 1. 89 1. 61 n/a 1. 53 0. 54 0. 02 0. 27 0. 20 0. 86 0. 72
Qualifying revolving retail	1. 86 1. 91
Other retail	5. 09 4. 83

1 The average actual PD represents a 6.5 year observation period for part of the portfolio.

2 Average estimated PD not relevant for specialised lending under the Supervisory Slotting approach.

3 Actual PDs based on a low volume of defaults observed.

Loss Given Default and Exposure at Default

LGDs for non-retail portfolios are based on accounts that defaulted in 2009 to 2018 financial years. LGDs for retail portfolios are based on accounts that defaulted in 2009 to 2019 financial years. Defaults occurring in the most recent years have been excluded from the analysis, to allow sufficient time for workout of impaired assets, booking of losses and more meaningful disclosures.

The EAD ratio compares estimates of EAD prior to default to realised EAD for obligors that defaulted.

APS 330 Table 9f (iii) – Accuracy of risk estimates – LGD and EAD

APS 330 Table 9f (iii) – Accuracy of risk estimates – LGD and EAD
	31 December 2020
	Average Ratio of estimated Average estimated EAD downturn LGD actual LGD to actual EAD
Portfolio Type	% %
Corporate SME corporate SME retail (including SME retail secured by residential mortgages) Specialised lending1 Sovereign2 Bank2 Residential mortgage (excluding SME retail secured by residential mortgages)3	54. 8 39. 7 1. 2 31. 7 21. 1 1. 1 31. 9 21. 8 1. 1 n/a 29. 6 1. 2 61. 3 1. 3 1. 8 65. 4 109. 9 1. 8 20. 6 5. 5 1. 0
Qualifying revolving retail Other retail	87. 2 70. 1 1. 1 97. 5 76. 7 1. 0

1 Average estimated LGD is not relevant for specialised lending under Supervisory Slotting approach.
2 Actual LGDs based on a low volume of defaults observed.
3 Estimated downturn LGD based on minimum regulatory floor requirements imposed by APRA and RBNZ.

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APS 330 Table 10b and 10c – Credit risk mitigation

APS 330 Table 10b and 10c – Credit risk mitigation
	31 December 2020
	Exposures Eligible Exposures covered by Total financial covered by credit exposure1 collateral guarantees derivatives Coverage $M $M $M $M %
Advanced approach2 Corporate SME corporate SME retail3 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	123,693 – 15 – – 54,412 – – – – 16,905 – – – – 139,472 – – – – 24,716 – 214 11 0. 9 623,810 – – – – 24,626 – – – – 9,684 – – – –
Total advanced approach	1,017,318 – 229 11 –
Specialised lending Standardised approach	68,697 – – – –
Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets Central clearingcounterparties	1,194 – – – – 752 – – – – 2,654 – – – – 595 – – – – 666 – – – – 14,771 – – – – 1,004 – – – – 23,408 – – – – 10,641 – – 112 1. 1
Total standardised approach	55,685 – – 112 0. 2
Total exposures	1,141,700 – 229 123 –

1 Credit derivatives that are treated as part of synthetic securitisation structures are excluded from credit risk mitigation disclosures and included within those relating to securitisation.

2 Advanced approach: Exposure for derivatives and guarantees is after netting and financial collateral.

3 Including SME retail secured by residential property.

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APS 330 Table 10b and 10c – Credit risk mitigation (continued)

	30 June 2020
	Exposures
	Eligible Exposures covered by Total financial covered by credit exposure 1 collateral guarantees derivatives Coverage $M $M $M $M %

Advanced approach2
Corporate SME corporate SME retail3 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	122,967 – 89 – 0. 1 51,856 – – – – 17,122 – – – – 108,124 – – – – 24,174 – 281 33 1. 3 599,513 – – – – 25,309 – – – – 9,855 – – – –
Total advanced approach	958,920 – 370 33 –
Specialised lending Standardised approach	66,433 – – – –
Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets	957 – – – – 741 – – – – 2,920 – – – – 565 – – – – 324 – – – – 15,102 – – – – 1,120 – – – – 17,799 – – – –
Central clearingcounterparties	10,483 – – 236 2. 3
Total standardised approach	50,011 – – 236 0. 5
Total exposures	1,075,364 – 370 269 0. 1

1 Credit derivatives that are treated as part of synthetic securitisation structures are excluded from credit risk mitigation disclosures and included within those relating to securitisation.

2 Advanced approach: Exposure for derivatives and guarantees is after netting and financial collateral.

3 Including SME retail secured by residential property.

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APS 330 Table 10b and 10c – Credit risk mitigation (continued)

	31 December 2019
	Exposures
	Eligible Exposures covered by Total financial covered by credit
	exposure 1 collateral guarantees derivatives Coverage
	$M $M $M $M %

Advanced approach 2
Corporate SME corporate SME retail3 Sovereign Bank Residential mortgage Qualifying revolving retail Other retail	121,557 – 45 – – 51,824 – – – – 16,211 – – – – 90,708 – – – – 26,809 – 341 32 1. 4 591,018 – – – – 26,679 – – – – 10,682 – – – –
Total advanced approach	935,488 – 386 32 –
Specialised lending Standardised approach	64,230 – – – –
Corporate SME corporate SME retail Sovereign Bank Residential mortgage Other retail Other assets	1,309 – – – – 756 – – – – 4,582 – – – – 475 – – – – 319 – – – – 14,416 – – – – 1,224 – – – – 16,678 – – – –
Central clearingcounterparties	9,014 – – 88 1. 0
Total standardised approach	48,773 – – 88 0. 2
Total exposures	1,048,491 – 386 120 –

1 Credit derivatives that are treated as part of synthetic securitisation structures are excluded from credit risk mitigation disclosures and included within those relating to securitisation.

2 Advanced approach: Exposure for derivatives and guarantees is after netting and financial collateral.

3 Including SME retail secured by residential property.

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APS 330 Table 11b (i) – Counterparty credit risk derivative exposure under the SA-CCR method

	31 Dec 20	30 Jun 20	31 Dec 19
	$M	$M	$M
Gross positive fair value	33,594	29,759	24,422
Netting and collateral benefits	(25,809)	(21,503)	(18,348)
Including collateral held of which:
Cash	(2,906)	(3,122)	(3,395)
Replacement cost	7,785	8,256	6,074
Potential future exposure	8,551	9,008	9,421
Impact of scaling factor of 1.4 and incurred CVA	6,431	6,742	6,111
Exposure at Default	22,767	24,006	21,606

APS 330 Table 11b (ii) – Counterparty credit risk derivative exposure[1]

APS 330 Table 11b (ii) – Counterparty credit risk derivative exposure 1
	Current Credit Exposure
	31 Dec 20 30 Jun 20 31 Dec 19
Exposure type	$M $M $M
Interest rate contracts	9,131 9,714 7,431
Foreign currency contracts Equity contracts Credit derivatives Commodities and other	24,120 19,288 16,686 – – 68 9 7 8 334 750 229
Total	33,594 29,759 24,422

1 Excluding exposures to CCP’s.

42 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 11c – Counterparty credit risk derivative transactions

APS 330 Table 11c– Counterparty credit risk derivative transactions
	Own Credit Portfolio		Intermediation	Activity
	Protection	Protection	Protection	Protection
Notional value by product type as at	buyer	seller	buyer	seller
31 December 2020 1, 2	$M	$M	$M	$M
Credit default swaps	2,233	–	–	450
Total return swaps	–	–	–	–
Credit options	–	–	–	–
Other	–	–	–	–
Total	2,233	–	–	450

1 Excluding exposures to CCP’s.

2 Notional values are presented for credit derivatives with positive fair values and include credit derivative hedges.

	Own Credit	Portfolio	Intermediation	Activity
	Protection	Protection	Protection	Protection
Notional value by product type as at	buyer	seller	buyer	seller
30 June 20201, 2	$M	$M	$M	$M
Credit default swaps	2,723	–	17	967
Total return swaps	–	–	–	–
Credit options	–	–	–	–
Other	–	–	–	–
Total	2,723	–	17	967

1 Excluding exposures to CCP’s.
2 Notional values are presented for credit derivatives with positive fair values and include credit derivative hedges.

	Own Credit	Portfolio	Intermediation	Activity
	Protection	Protection	Protection	Protection
Notional value by product type as at	buyer	seller	buyer	seller
31 December 20191, 2	$M	$M	$M	$M
Credit default swaps	1,471	–	46	964
Total return swaps	–	–	–	–
Credit options	–	–	–	–
Other	–	–	–	–
Total	1,471	–	46	964

1 Excluding exposures to CCP’s. 2 Notional values are presented for credit derivatives with positive fair values and include credit derivative hedges.

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APS 330 Table 12g (i) – Banking book exposures securitised – traditional securitisation

	31 December 2020
	Group originated Group originated Group originated Third party assets - assets - non assets - internal originated capital relief1 capital relief2 RMBS 3 assets 4
Underlying Asset	$M $M $M $M
Residential mortgage	5,152 6,234 107,554 –
Credit cards and other personal loans Auto and equipment finance Commercial loans Other	– – – – – – – – – – – – – – – –
Total	5,152 6,234 107,554 –

1 Group originated assets - capital relief comprise CBA Medallion Trust subject to capital treatment under APS 120.
2 Group originated assets - non capital relief comprise CBA Medallion Trust subject to capital treatment under APS 113.
3 Group originated assets - internal RMBS comprise CBA Medallion and ASB Medallion Trusts held for contingent liquidity purposes. 4 Third party originated assets comprise assets managed and sponsored by the Group.

	30 June 2020
	Group originated Group originated Group originated Third party assets - assets - non assets - internal originated capital relief1 capital relief2 RMBS 3 assets 4
Underlying Asset	$M $M $M $M

Residential mortgage	5,605 6,909 136,482 –
Credit cards and other personal loans Auto and equipment finance Commercial loans Other	– – – – – – – – – – – – – – – –
Total	5,605 6,909 136,482 –

1 Group originated assets - capital relief comprise CBA Medallion Trust subject to capital treatment under APS 120.
2 Group originated assets - non capital relief comprise CBA Medallion Trust subject to capital treatment under APS 113.
3 Group originated assets - internal RMBS comprise CBA Medallion and ASB Medallion Trusts held for contingent liquidity purposes.
4 Third party originated assets comprise assets managed and sponsored by the Group.

	31 December 2019
	Group originated Group originated Group originated Third party assets - assets - non assets - internal originated capital relief1 capital relief2 RMBS 3 assets 4
Underlying Asset	$M $M $M $M

Residential mortgage	6,103 7,685 60,612 –
Credit cards and other personal loans Auto and equipment finance Commercial loans Other	– – – – – – – – – – – – – – – –
Total	6,103 7,685 60,612 –

1 Group originated assets - capital relief comprise CBA Medallion Trust, and Bankwest Swan Trust, subject to capital treatment under APS 120.
2 Group originated assets - non capital relief comprise CBA Medallion Trust, and Bankwest Swan Trust, subject to capital treatment under APS 113.
3 Group originated assets - internal RMBS comprise CBA Medallion and ASB Medallion Trusts, and Bankwest Swan Trust, held for contingent liquidity purposes. 4 Third party originated assets comprise assets managed and sponsored by the Group.

Provision of implicit support to securitisation pool

The Bank repurchased $86 million securitised loans that had been granted payment relief between April and June 2020. APRA has assessed this action and determined it constituted implicit support of CBA’s external RMBS program and was inconsistent with the intent of APS 120. In addition to this disclosure APRA requires CBA to obtain an external review of its securitisation programs prior to issuing any further RMBS, using an independent assessor and with a review scope agreed with APRA. APRA expects this review to be completed by the end of the 2021 calendar year.

APS 330 Table 12g (ii) – Banking book exposures securitised – synthetic securitisation

APS 120 provides specific regulatory treatment for synthetic securitisations where credit risk is transferred to a third party, however, legal ownership of the underlying assets remains with the originator.

The Group has not undertaken any synthetic securitisation in the banking book.

44 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 12g (iii) – Total banking book exposures securitised

APS 330 Table 12g (i) discloses the total banking book exposures securitised by the Group.

APS 330 Table 12h – Past due and impaired banking book exposures by asset type

	31 December 2020
	Group originated assets securitised
	Outstanding Impaired Losses
Underlying Asset	exposure assets Past due1 recognised $M $M $M $M
Residential mortgage	118,940 22 278 –
Credit cards and other personal loans Auto and equipment finance Commercial loans Other	– – – – – – – – – – – – – – – –
Total	118,940 22 278 –

1 Represents loans ≥ 90 days past due but not impaired.

	30 June 2020
	Group originated assets securitised
	Outstanding Impaired Losses
Underlying Asset	exposure assets Past due1 recognised $M $M $M $M

Residential mortgage Credit cards and other personal loans Auto and equipment finance Commercial loans Other	148,996 19 298 – – – – – – – – – – – – – – – – –
Total	148,996 19 298 –

1 Represents loans ≥ 90 days past due but not impaired.

	31 December 2019
	Group originated assets securitised
	Outstanding Impaired Losses
Underlying Asset	exposure assets Past due1 recognised $M $M $M $M

Residential mortgage Credit cards and other personal loans Auto and equipment finance Commercial loans Other	74,400 16 309 – – – – – – – – – – – – – – – – –
Total	74,400 16 309 –

1 Represents loans ≥ 90 days past due but not impaired.

APS 330 Table 12i – Banking book exposures intended to be securitised

The Group does not have any outstanding banking book exposures that are intended to be securitised at 31 December 2020.

Commonwealth Bank of Australia – Pillar 3 Report 45

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APS 330 Table 12j (i) – Banking book activity for the reporting period

The Group’s new securitisation activity in the banking book during the half year ended 31 December 2020, was $416 million.

	Halfyear ended 31 December 2020
	Total Recognised exposures gain or loss securitised on sale
Underlying Asset	$M $M
Residential mortgages Credit cards and other personal loans Auto and equipment finance Commercial loans Other	414 – 2 – – – – – – –
Total	416 –

	Fullyear ended 30 June 2020
	Total Recognised exposures gain or loss securitised on sale
Underlying Asset	$M $M
Residential mortgages Credit cards and other personal loans Auto and equipment finance Commercial loans Other	4,681 – – – 657 – 49 – – –
Total	5,387 –

	Halfyear ended 31 December 2019
	Total Recognised exposures gain or loss securitised on sale
Underlying Asset	$M $M
Residential mortgages Credit cards and other personal loans Auto and equipment finance Commercial loans Other	4,396 – – – – – 10 – – –
Total	4,406 –

46 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 12k – Banking book securitisation exposures retained or purchased

	31 December 2020
	Total On Balance Sheet Off Balance Sheet exposures
Securitisation Facility Type	$M $M $M
Liquidity support facilities Warehouse facilities Derivative facilities Holdings of securities Other	– 293 293 5,009 4,814 9,823 315 160 475 5,300 – 5,300 – 10 10
Total securitisation exposures in the banking book	10,624 5,277 15,901

	30 June 2020
	Total On Balance Sheet Off Balance Sheet exposures
Securitisation Facility Type	$M $M $M

Liquidity support facilities Warehouse facilities Derivative facilities Holdings of securities Other	– 258 258 6,840 2,846 9,686 367 172 539 6,039 – 6,039 – 10 10
Total securitisation exposures in the banking book	13,246 3,286 16,532

	31 December 2019
	Total On Balance Sheet Off Balance Sheet exposures
Securitisation Facility Type	$M $M $M
Liquidity support facilities Warehouse facilities Derivative facilities Holdings of securities Other	– 257 257 5,042 4,082 9,124 401 192 593 6,989 – 6,989 – 10 10
Total securitisation exposures in the banking book	12,432 4,541 16,973

Commonwealth Bank of Australia – Pillar 3 Report 47

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APS 330 Table 12l (i) – Banking book exposure by risk weighting

Total securitisation exposures in the banking book decreased by $631 million or 3.8% during the half year ended 31 December 2020. The corresponding RWA decreased by $34 million or 1.1%, mainly due to the overall decreases of investment exposure, partly offset by upward revision of warehouse risk weights.

Risk Weight Band	31 December 2020
	Total Total Securitisation Resecuritisation exposures Securitisation Resecuritisation RWA $M $M $M $M $M $M Exposures Risk Weighted Assets
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	15,355 – 15,355 2,794 – 2,794 435 – 435 118 – 118 67 – 67 28 – 28 41 – 41 23 – 23 – – – – – – – – – – – – – – – – – –
Total	15,898 – 15,898 2,963 – 2,963

Risk Weight Band	30 June 2020
	Total Total Securitisation Resecuritisation exposures Securitisation Resecuritisation RWA $M $M $M $M $M $M Exposures Risk Weighted Assets
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	15,963 – 15,963 2,828 – 2,828 470 – 470 126 – 126 68 – 68 28 – 28 28 – 28 15 – 15 – – – – – – – – – – – – – – – – – –
Total	16,529 – 16,529 2,997 – 2,997

Risk Weight Band	31 December 2019
	Total Total Securitisation Resecuritisation exposures Securitisation Resecuritisation RWA $M $M $M $M $M $M Exposures Risk Weighted Assets
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	16,736 – 16,736 3,054 – 3,054 – – – – – – 150 – 150 64 – 64 84 – 84 59 – 59 – – – – – – – – – – – – – – – – – –
Total	16,970 – 16,970 3,177 – 3,177

48 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 12l (ii) – Banking book exposure deducted entirely from capital

APS 330 Table 12l (ii) – Banking book exposure deducted entirely from capital
	Common Equity Tier 1 Capital
	31 Dec 20 30 Jun 20 31 Dec 19
Underlying Asset	$M $M $M
Residential mortgage Credit cards and other personal loans Auto and equipment finance Commercial loans Other	3 3 3 – – – – – – – – – – – –
Total	3 3 3

APS 330 Table 12m – Banking book exposures subject to early amortisation

The Group has not undertaken any securitisation subject to early amortisation treatment.

APS 330 Table 12n – Banking book resecuritisation exposures

As at 31 December 2020, banking book resecuritisation exposures without credit risk mitigation was nil (30 June 2020: nil, 31 December 2019: nil).

The Group did not have any resecuritisation exposures subject to credit risk mitigation.

The Group did not have any exposure to third party guarantors providing guarantees for securitised assets.

APS 330 Table 12o (i) – Trading book exposures securitised – traditional securitisation

The Group has no traditional securitisation exposures in the trading book.

APS 330 Table 12o (ii) – Trading book exposures securitised – synthetic securitisation

The Group has not undertaken any synthetic securitisation in the trading book.

APS 330 Table 12o (iii) – Total trading book exposures securitised

The Group has not securitised any exposures in the trading book.

APS 330 Table 12p – Trading book exposures intended to be securitised

The Group does not have any outstanding trading book exposures that are intended to be securitised at 31 December 2020.

APS 330 Table 12q – Trading book activity for the reporting period

The Group participated in third party securitisation in the trading book during the half year ended 31 December 2020, relating to $35 million residential mortgages (30 June 2020: $28 million, 31 December 2019: $28 million), nil auto and equipment finance (30 June 2020: $7 million, 31 December 2019: $7 million), and $4 million personal finance (30 June 2020: $22 million, 31 December 2019: $2 million) exposures.

APS 330 Table 12r – Trading book exposures subject to APS 116

The aggregate amount of exposures securitised by the Group and subject to APS 116 was $93 million as at 31 December 2020 (30 June 2020: $93 million, 31 December 2019: $69 million), all of which are traditional securitisations. This consists of:

Securities held in the trading book subject to the Standard Method of $36 million (30 June 2020: $11 million, 31 December 2019: $2 million); and
Derivatives held in the trading book subject to the Internal Models Approach (IMA) of $57 million (30 June 2020: $82 million, 31 December 2019: $67 million).

Commonwealth Bank of Australia – Pillar 3 Report 49

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APS 330 Table 12s – Trading book exposures retained or purchased subject to APS 120

	31 December 2020
	On Balance Off Balance Total Sheet Sheet exposures
Securitisation Facility Type	$M $M $M
Liquidity support facilities	– – –
Warehouse facilities Derivative facilities Holdings of securities Other	– – – 21 36 57 36 – 36 – – –
Total securitisation exposures in the trading book	57 36 93
	30 June 2020
	On Balance Off Balance Total Sheet Sheet exposures
Securitisation Facility Type	$M $M $M

Liquidity support facilities Warehouse facilities Derivative facilities Holdings of securities Other	– – – – – – 38 44 82 11 – 11 – – –
Total securitisation exposures in the trading book	49 44 93
	31 December 2019
	On Balance Off Balance Total Sheet Sheet exposures
Securitisation Facility Type	$M $M $M

Liquidity support facilities Warehouse facilities Derivative facilities Holdings of securities Other	– – – – – – 26 41 67 2 – 2 – – –
Total securitisation exposures in the trading book	28 41 69

APS 330 Table 12t (i) – Trading book exposures retained/purchased subject to IMA

The Group has $57 million of derivatives exposures held in the trading book subject to IMA (default risk) under APS 116 as at 31 December 2020 (30 June 2020: $82 million, 31 December 2019: $67 million).

50 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 12t (ii) – Trading book exposures subject to APS 120 by risk weighting

Risk Weight Band	31 December 2020
	Total ERBA Approach SFA Approach exposures $M $M $M
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	71 14 85 – 8 8 – – – – – – – – – – – – – – –
Total	71 22 93
Risk Weight Band	30 June 2020
	Total ERBA Approach SFA Approach exposures $M $M $M
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	63 21 84 – 9 9 – – – – – – – – – – – – – – –
Total	63 30 93
Risk Weight Band	31 December 2019
	Total ERBA Approach SFA Approach exposures $M $M $M
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	50 18 68 – – – – 1 1 – – – – – – – – – – – –
Total	50 19 69

APS 330 Table 12u (i) – RWA of trading book exposures retained/purchased subject to IMA

The Group has $142 million of RWA held in the trading book subject to IMA (default risk) under APS 116 as at 31 December 2020 (30 June 2020: $166 million, 31 December 2019: $205 million).

Commonwealth Bank of Australia – Pillar 3 Report 51

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APS 330 Table 12u (ii) – Capital requirements (RWA) of trading book exposures subject to APS 120 by risk weighting

Risk Weight Band	31 December 2020
	Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation $M $M $M $M $M $M $M $M ERBA Approach SFA Approach Standardised Approach Total Capital Requirements
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	14 – 2 – – – 16 – – – 2 – – – 2 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
Total	14 – 4 – – – 18 –
Risk Weight Band	30 June 2020
	Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation $M $M $M $M $M $M $M $M ERBA Approach SFA Approach Standardised Approach Total Capital Requirements
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	13 – 3 – – – 16 – – – 2 – – – 2 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
Total	13 – 5 – – – 18 –
Risk Weight Band	31 December 2019
	Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation Securitisation Resecuritisation $M $M $M $M $M $M $M $M ERBA Approach SFA Approach Standardised Approach Total Capital Requirements
≤ 25% > 25% ≤ 35% > 35% ≤ 50% > 50% ≤ 75% > 75% ≤ 100% > 100% ≤ 650% > 650% ≤ 1250%	10 – 3 – – – 13 – – – – – – – – – – – 1 – – – 1 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
Total	10 – 4 – – – 14 –

				31 December	2019
	ERBA Approach		SFA Approach		Standardised	Approach	Total Capital Requirements
	Securitisation	Resecuritisation	Securitisation	Resecuritisation	Securitisation	Resecuritisation	Securitisation	Resecuritisation
Risk Weight Band	$M	$M	$M	$M	$M	$M	$M	$M
≤ 25%	10	–	3	–	–	–	13	–
> 25% ≤ 35%	–	–	–	–	–	–	–	–
> 35% ≤ 50%	–	–	1	–	–	–	1	–
> 50% ≤ 75%	–	–	–	–	–	–	–	–
> 75% ≤ 100%	–	–	–	–	–	–	–	–
> 100% ≤ 650%	–	–	–	–	–	–	–	–
> 650% ≤ 1250%	–	–	–	–	–	–	–	–
Total	10	–	4	–	–	–	14	–

52 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 12u (iii) – Trading book exposures entirely deducted from capital

The Group has no trading book exposures that are deducted entirely from CET1 capital as at 31 December 2020 (30 June 2020: nil, 31 December 2019: nil).

The Group did not have any trading book exposures that are credit enhancements deducted from Total Capital or any other exposures deducted from Total Capital.

APS 330 Table 12v – Trading book exposures subject to early amortisation

The Group has not undertaken any securitisation subject to early amortisation treatment.

APS 330 Table 12w – Trading book resecuritisation exposures

The Group did not have any trading book resecuritisation exposures without credit risk mitigation as at 31 December 2020 (30 June 2020: nil, 31 December 2019: nil).

The Group did not have any resecuritisation exposures subject to credit risk mitigation.

The Group did not have any third party guarantors providing guarantees for securitised assets.

APS 330 Table 5a – Total securitisation activity for the reporting period

The Group disclosed the summary of the current period’s securitisation activity including the total amount of exposures securitised and gain or loss recognised on sale by exposure type in APS 330 Table 12j (banking book) and APS 330 Table 12q (trading book).

The total exposures securitised in the half year to 31 December 2020 was $455 million (31 December 2019: $4,443 million). The total exposures securitised in the full year to 30 June 2020 was $5,444 million.

APS 330 Table 5b – Summary of total securitisation exposures retained or purchased

	As at 31 December 2020	As at 31 December 2020
	On Balance	Off Balance	Total
	Sheet	Sheet	exposures
Securitisation Facility Type	$M	$M	$M
Liquidity support facilities	–	293	293
Warehouse facilities	5,009	4,814	9,823
Derivative facilities	336	196	532
Holdings of securities	5,336	–	5,336
Other	–	10	10
Total securitisation exposures	10,681	5,313	15,994

Total securitisation exposures	10,681 5,313	10,681 5,313	15,994
	As at 30 June 2020
	On Balance	Off Balance	Total
	Sheet	Sheet	exposures
Securitisation Facility Type	$M	$M	$M
Liquidity support facilities	–	258	258
Warehouse facilities	6,840	2,846	9,686
Derivative facilities	405	216	621
Holdings of securities	6,050	–	6,050
Other	–	10	10
Total securitisation exposures	13,295	3,330	16,625

	As at 31 December 2019	As at 31 December 2019
	On Balance	Off Balance	Total
	Sheet	Sheet	exposures
Securitisation Facility Type	$M	$M	$M
Liquidity support facilities	–	257	257
Warehouse facilities	5,042	4,082	9,124
Derivative facilities	427	233	660
Holdings of securities	6,991	–	6,991
Other	–	10	10
Total securitisation exposures	12,460	4,582	17,042

Commonwealth Bank of Australia – Pillar 3 Report 53

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APS 330 Table 16b to 16f – Equity investment exposures[1]

APS 330 Table 16b to 16f – Equity investment exposures1
Equity Investments		31 December 2020
		Balance Fair Sheet value value $M $M
Value of listed (publicly traded) equities Value of unlisted(privatelyheld)equities		1,853 2,814 1,930 2,149
Total		3,783 4,963

		30 June 2020
Equity Investments		Balance Fair Sheet value value $M $M
Value of listed (publicly traded) equities Value of unlisted(privatelyheld)equities		1,855 1,749 1,763 1,657
Total		3,618 3,406

		31 December 2019
Equity Investments		Balance Fair Sheet value value $M $M
Value of listed (publicly traded) equities Value of unlisted(privatelyheld)equities		1,879 1,801 1,699 1,698
Total		3,578 3,499

	Halfyear ended
	31 Dec 20 30 Jun 20 31 Dec 19
Gains on Equity Investments	$M $M $M
Cumulative realised gains in reporting period	8 – –
Total unrealisedgains	269 53 38

1 Equity investment exposures including non-traded equity investments as well as investments in associates that are treated as capital deductions and are not risk weighted at Level 2.

54 Commonwealth Bank of Australia – Pillar 3 Report

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Capital Calculation Methods

The breakdown of RWA for traded market risk by modelling method is summarised in the table below.

	31 Dec 20	30 Jun 20	31 Dec 19
Traded Market Risk RWA by Modelling Approach1	$M	$M	$M
Internal Model Approach	10,376	11,455	4,672
Standard Method	785	1,002	756
Total Traded Market Risk RWA	11,161	12,457	5,428

1 Refer to page 11 for commentary.

The capital requirement for traded market risk under the standard method is disclosed in APS 330 Table 13b. APS 330 Table 13b – Traded Market Risk under the Standard Method

APS 330 Table 13b – Traded Market Risk under the Standard Method
	31 Dec 20	30 Jun 20	31 Dec 19
Exposure Type	$M	$M	$M
Interest rate risk	62. 8	80. 2	60. 4
Equity risk	–	–	0. 1
Foreign exchange risk	–	–	–
Commodityrisk	–	–	–
Total	62. 8	80. 2	60. 5
Risk Weighted Asset equivalent 1	785	1,002	756

1 Risk Weighted Assets equivalent is the capital requirements multiplied by 12.5 in accordance with APS 110.

Traded Market Risk Internal Model

The VaR and SVaR results calculated under the internal model approach are summarised in APS 330 Table 14f (i).

APS 330 Table 14f (i) – Value-at-Risk and Stressed Value-at-Risk for Trading Portfolios under the Internal Model Approach

Average VaR1	Aggregate VaR Over the Reporting Period
	As at Mean Maximum Minimum balance value value value date $M $M $M $M

Over the 6 months to 31 December 2020 Over the 6 months to 30 June 2020 Over the 6 months to 31 December 2019	156 219 69 153 109 272 20 124 31 49 21 36

1 10 day, 99% confidence interval over the reporting period.

Stressed VaR 1	Aggregate SVaR Over the Reporting Period
	As at Mean Maximum Minimum balance value value value date $M $M $M $M

Over the 6 months to 31 December 2020 Over the 6 months to 30 June 2020 Over the 6 months to 31 December 2019	92 196 37 68 128 325 34 41 146 267 33 39

1 10 day, 99% confidence interval over the reporting period.

Internal Model Approach – Back-test results

The internal model is subject to back-testing against hypothetical profit and loss. In the 6 months to 31 December 2020 there were no back-test outliers. In accordance with guidelines from APRA, in specific circumstances an ADI may disregard back-test outliers that occurred in March and April 2020 in determining a plus factor for an ADI under paragraph 85-86 of APS 116. The back-test results are summarised in APS 330 Table 14f (ii) and details of these are provided in APS 330 Table 14f (iii). A comparison of VaR with actual gains or losses during the 6 months to 31 December 2020 is illustrated in APS 330 Table 14f (iv).

APS 330 Table 14f (ii) - Summary Table of the Number of Back-Testing Outliers[ 1]

Over the 6 months to 31 December 2020 – Over the 6 months to 30 June 2020 1 Over the 6 months to 31 December 2019 1

1 1 day, 99% confidence interval over the reporting period

Commonwealth Bank of Australia – Pillar 3 Report 55

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APS 330 Table 14f (iii) – Details of Back-Test

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----- Start of picture text -----

Over the Reporting Period
1 July 2020 to 31 December 2020
Hypothetical VaR
loss 99%
Date $M $M
– –
Over the Reporting Period
1 January 2020 to 30 June 2020
Hypothetical VaR
loss 99%
Date $M $M
28 February 2020 27 12
Over the Reporting Period
1 July 2019 to 31 December 2019
Hypothetical VaR
loss 99%
$M $M
05 August 2019 18 9
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APS 330 Table 14f (iv) – Comparison of VaR estimates Outliers with actual gains/losses experiences

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Actual Profit & Loss ($m)
60.0
40.0
20.0
0.0
-20.0
-40.0
-60.0
0.0 20.0 40.0 60.0
Daily VaR ($m)
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APS 330 Table 17b – Interest Rate Risk in the Banking Book

APS 330 Table 17b – Interest Rate Risk in the Banking Book
	Change in Economic Value
	31 Dec 20 30 Jun 20 31 Dec 19
Stress Testing: Interest Rate Shock Applied	$M $M $M
AUD 200 basis point parallel increase 200 basis point parallel decrease NZD 200 basis point parallel increase 200 basis point parallel decrease USD 200 basis point parallel increase 200 basis point parallel decrease Other 200 basis point parallel increase 200 basispointparallel decrease	(1,388) (808) (411) 1,472 870 476 (394) (348) (370) 418 370 393 (167) (131) (148) (31) 144 159 48 36 (7) (48) (37) 8


	31 Dec 20 30 Jun 20 31 Dec 19
Regulatory RWA1	$M $M $M
Interest rate risk in the bankingbook	15,561 11,085 8,998

1 Refer to page 11 for commentary.

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On 20 November 2020, APRA reduced the capital add-on by $500 million or $6.25 billion RWA, reflecting the progress made against the Prudential Inquiry Remedial Action Plan.

APS 330 Table 6e – Capital requirements for operational risk

		31 Dec 20	30 Jun 20	31 Dec 19
		$M	$M	$M
Total operational risk RWA	1	49,994	57,212	59,511

1 Refer to page 11 for commentary.

56 Commonwealth Bank of Australia – Pillar 3 Report

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The Group calculates its LCR position on a daily basis, ensuring a buffer is maintained over the minimum regulatory requirement of 100% and the Board’s risk appetite. Over the December 2020 quarter, excess liquid assets averaged $55 billion and the average LCR decreased by 3% from 146% to 143%.

The Group’s mix of liquid assets consists of HQLA, such as cash, deposits with central banks, Australian Semi-Government and Commonwealth Government securities. Liquid assets also include repo-eligible securities with the RBA under the Committed Liquidity Facility (CLF) and TFF, and securities classified as liquid assets by the RBNZ. Liquid assets are distributed across the Group to support regulatory and internal requirements and are consistent with the distribution of liquidity needs by currency. Average Liquid Assets decreased over the quarter as the size of the Group’s CLF decreased from $45.8 billion to $30.0 billion on 1 December 2020.

NCOs are modelled under an APRA prescribed 30 day severe liquidity stress scenario. The Group manages modelled NCOs by maintaining a large base of low LCR outflow customer deposits and actively managing its wholesale funding maturity profile as part of its overall liquidity management strategy. Average NCOs increased slightly over the quarter driven by strong growth in at-call deposits.

APS 330 Table 20 – LCR Disclosure Template

APS 330 Table 20– LCR Disclosure Template
	31 Dec 20 31 Dec 20	30 Sep 20 30 Sep 20
	Total unweighted value Total weighted value (average) 1 (average) 1 $M $M	Total unweighted value Total weighted value (average) 1 (average) 1 $M $M
Liquid assets, of which:
1 High quality liquid assets (HQLA)	122,514	120,506
2 Alternative liquid assets (ALA) 3 Reserve Bank of New Zealand (RBNZ) securities Cash outflows 4 Retail deposits and deposits from small business customers, of which: 5 Stable deposits 6 Less stable deposits 7 Unsecured wholesale funding, of which: 8 Operational deposits (all counterparties) and deposits in networks for cooperative banks 9 Non-operational deposits (all counterparties) 10 Unsecured debt 11 Secured wholesale funding 12 Additional requirements, of which: 13 Outflows related to derivatives exposures and other collateral requirements 14 Outflows related to loss of funding on debt products 15 Credit and liquidity facilities 16 Other contractual funding obligations 17 Other contingent fundingobligations	57,065 3,576 369,448 33,200	63,436 2,335 353,983 31,938
	199,391 9,970 170,057 23,230 161,523 74,639	188,781 9,439 165,202 22,499 157,327 75,731
	64,463 15,824 87,000 48,755 10,060 10,060 774 167,831 23,583	57,180 14,053 88,648 50,179 11,499 11,499 1,064 160,799 21,828
	5,650 5,650 – – 162,181 17,933 14 – 71,080 8,593	5,480 5,480 – – 155,319 16,348 35 – 74,290 10,153
18 Total cash outflows	140,789	140,714
Cash inflows 19 Secured lending 20 Inflows from fully performing exposures 21 Other cash inflows	7,251 1,392 9,420 6,353 4,711 4,711	7,250 1,292 8,938 5,789 6,154 6,154
22 Total cash inflows	21,382 12,456	22,342 13,235
23 Total liquid assets 24 Total net cash outflows 25 Liquidity Coverage Ratio (%) Number of datapoints used(Business Days)	183,155 128,333 143 64	186,277 127,479 146 65

1 The averages presented are calculated as simple averages of daily observations over the previous quarter.

Commonwealth Bank of Australia – Pillar 3 Report 57

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The NSFR requires Australian ADIs to have sufficient ASF to meet their RSF over a one year horizon. The Group calculates its NSFR position daily, ensuring a buffer is maintained over the regulatory requirement of 100% and the Board’s risk appetite. The ASF and RSF are calculated by applying factors prescribed by APRA, to liabilities, assets and off Balance Sheet commitments.

The Group’s main sources of ASF are deposits from retail and SME customers, wholesale funding and capital. The main contributors to RSF are residential mortgages and loans to business and corporate customers.

The Group’s NSFR decreased by 2% over the quarter, from 125% at 30 September 2020 to 123% at 31 December 2020. The decrease was driven by an increase in RSF, primarily due to the reduction in the Group’s CLF and strong mortgage growth. This was partly offset by an increase in ASF due to strong deposit inflows from retail and SME customers.

APS 330 Table 21 – NSFR disclosure template

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As at 31 December 2020
Unweighted value by residual maturity
Weighted
No Maturity 0 - 6 months 7 - 12 months > 12 months
value
$M $M $M $M $M
Available Stable Funding (ASF) Item
1 Capital 74,634 – – 28,647 103,281
2 Regulatory Capital 74,634 – – 28,647 103,281
3 Other Capital Instruments – – – – –
4 Retail deposits and deposits from small business customers 356,348 100,613 16 186 423,891
5 Stable deposits 1 205,217 43,276 13 21 236,102
6 Less stable deposits 2 151,131 57,337 3 165 187,789
7 Wholesale funding 141,238 143,549 34,905 94,654 188,194
8 Operational deposits 64,436 – – – 32,218
9 Other wholesale funding 76,802 143,549 34,905 94,654 155,976
10 Liabilities with matching interdependent assets – – – – –
11 Other liabilities – 16,726 202 2,817 2,918
12 NSFR derivative liabilities – 8,113 – – –
13 All other liabilities and equity not included in the above – 8,613 202 2,817 2,918
categories
14 Total ASF 718,284
Required Stable Funding (RSF) Item
15 a) Total NSFR HQLA – 139,592 – – 4,911
15 b) ALA – 70,958 – – 7,096
15 c) RBNZ Securities – 4,336 – – 439
16 Deposits held at other financial institutions for operational – – – – –
purposes
17 Performing loans and securities 845 68,475 40,832 632,562 519,656
18 Performing loans to financial institutions secured by 432 10,175 – – 1,061
Level 1 HQLA
Performing loans to financial institutions secured by non-Level 1
19 413 13,657 5,805 17,047 22,061
HQLA and unsecured performing loans to financial institutions
Performing loans to non-financial corporate clients, loans to
20 retail and small business customers, and loans to sovereigns, – 32,489 26,846 130,694 140,661
central banks and public sector entities (PSEs)
21 of which: with a risk weight of less than or equal to 35% under – 43 48 485 360
APS 112
22 Performing residential mortgages – 8,135 7,653 480,006 349,295
23 of which: with a risk weight equal to 35% under APS 112 – 6,935 6,523 387,824 269,535
24 Securities that are not in default and do not qualify as HQLA, – 4,019 528 4,815 6,578
including exchange-traded equities
25 Assets with matching interdependent liabilities – – – – –
26 Other assets: 10,279 29,886 896 24,489 41,950
27 Physical traded commodities, including gold 10,279 – – – 8,738
28 Assets posted as initial margin for derivative contracts and – 1,822 – – 1,549
contributions to default funds of central counterparties (CCPs)
29 NSFR derivative assets – 10,687 – – 2,575
30 NSFR derivative liabilities before deduction of variation margin – 14,561 – – 2,912
posted
31 All other assets not included in the above categories – 2,816 896 24,489 26,176
32 Off Balance Sheet items – 189,371 – – 8,653
33 Total RSF 582,705
34 Net Stable Funding Ratio (%) 123
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1 Stable deposits are the portion of deposits that are protected under the Financial Claims Scheme where depositors have an established relationship with the Bank or the deposits are in transactional accounts.

2 Less stable deposits are the portion of deposits that do not meet the requirements of stable deposits.

58 Commonwealth Bank of Australia – Pillar 3 Report

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	As at 30 September 2020
	No Maturity 0 - 6 months 7 - 12 months > 12 months Weighted value Unweighted value by residual maturity
	$M $M $M $M $M

Available Stable Funding (ASF) Item
1 Capital	71,818 – – 29,141 100,960
2 Regulatory Capital 3 Other Capital Instruments	71,818 – – 29,141 100,960 – – – – –
4 Retail deposits and deposits from small business customers	339,543 105,616 25 193 412,287
5 Stable deposits1 6 Less stable deposits2	183,374 45,171 17 18 217,152 156,169 60,445 8 175 195,135
7 Wholesale funding 8 Operational deposits 9 Other wholesale funding 10 Liabilities with matching interdependent assets 11 Other liabilities 12 NSFR derivative liabilities 13 All other liabilities and equity not included in the above categories	140,941 135,052 29,531 104,011 194,227
	61,870 – – – 30,927 79,071 135,052 29,531 104,011 163,300 – – – – – – 18,022 248 2,764 2,888
	– 9,298 – – – – 8,724 248 2,764 2,888
14 Total ASF	710,362
Required Stable Funding (RSF) Item 15 a) Total NSFR HQLA 15 b) ALA 15 c) RBNZ Securities 16 Deposits held at other financial institutions for operational purposes 17 Performing loans and securities 18 Performing loans to financial institutions secured by Level 1 HQLA 19 Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions 20 Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and public sector entities (PSEs) 21 of which: with a risk weight of less than or equal to 35% under APS 112 22 Performing residential mortgages 23 of which: with a risk weight equal to 35% under APS 112 24 Securities that are not in default and do not qualify as HQLA, including exchange-traded equities 25 Assets with matching interdependent liabilities 26 Other assets: 27 Physical traded commodities, including gold 28 Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) 29 NSFR derivative assets 30 NSFR derivative liabilities before deduction of variation margin posted 31 All other assets not included in the above categories 32 Off Balance Sheet items	132,419 5,370 78,214 7,821 4,664 466 – – – – – 1,210 66,883 39,981 618,316 509,041
	827 11,328 – – 1,215 383 13,119 6,925 14,960 20,448 – 31,351 25,126 134,535 142,497 – 35 36 480 348 – 7,227 7,202 463,272 337,589 – 6,188 6,165 374,016 260,392 – 3,858 728 5,549 7,292 – – – – – 8,130 27,838 712 25,192 37,075
	8,130 – – – 6,910 – 1,839 – – 1,563 – 8,354 – – – – 13,613 – – 2,723 – 4,032 712 25,192 25,879 – 181,139 – – 8,225
33 Total RSF	567,998
34 Net Stable Funding Ratio (%)	125

2 Less stable deposits are the portion of deposits that do not meet the requirements of stable deposits.

Commonwealth Bank of Australia – Pillar 3 Report 59

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The Group is applying the Basel III regulatory adjustments in full, as implemented by APRA. These tables should be read in conjunction with Appendix 11.3 Regulatory Balance Sheet and Appendix 11.4 Reconciliation between Detailed Capital Template and Regulatory Balance Sheet.

	31 Dec 20	31 Dec 20
	Basel III	Basel III
	APRA	Internationally
		Comparable
Summary Group Capital Adequacy Ratios(Level 2)	%	%
CET1	12. 6	18. 7
Tier 1	15. 0	21. 8
Total Capital	18. 9	26. 9

		31 Dec 20	Reconciliation
		Basel III	Table
		$M	Reference
Common Equity Tier 1 Capital: instruments and reserves
1	Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital	38,417	Table A
2	Retained earnings	33,915
3	Accumulated other comprehensive income (and other reserves)	2,287
4	Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned	–
	companies)
5	Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)	–	Table B
6	Common EquityTier 1 Capital before regulatoryadjustments	74,619
Common Equity Tier 1 Capital: regulatory adjustments
7	Prudential valuation adjustments	(9)
8	Goodwill (net of related tax liability)	(5,997)	Table C
9	Other intangibles other than mortgage servicing rights (net of related tax liability)	(1,642)	Table C
10	Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)	–	Table D
11	Cash flow hedge reserve	(994)
12	Shortfall of provisions to expected losses1	–
13	Securitisation gain on sale (as set out in paragraph 562 of Basel II framework)	–
14	Gains and losses due to changes in own credit risk on fair valued liabilities	–
15	Defined benefit superannuation fund net assets2	(180)
16	Investments in own shares (if not already netted off paid-in capital on reported Balance Sheet)	–
17	Reciprocal cross-holdings in common equity	–
18	Investments in the capital of banking, financial and insurance entities that are outside the scope
	of regulatory consolidation, net of eligible short positions, where the ADI does not own more	–	Table G
	than 10% of the issued share capital (amount above 10% threshold)
19	Significant investments in the ordinary shares of banking, financial and insurance entities that
	are outside the scope of regulatory consolidation, net of eligible short positions (amount above	–	Table G
	10% threshold)
20	Mortgage service rights (amount above 10% threshold)	–
21	Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)	–	Table D
22	Amount exceeding the 15% threshold
23	of which: significant investments in the ordinary shares of financial entities	–	Table G
24	of which: mortgage servicing rights	–
25	of which: deferred tax assets arisingfrom temporarydifferences	–	Table D
	CET1(InternationallyComparable)	65,797

1 As at 31 December 2020, there is no shortfall with eligible credit provisions in excess of regulatory expected loss (pre-tax) using stressed LGD assumptions associated with the loan portfolio included in row 50. The Group’s GRCL methodology results in an amount lower than the provision recognised for accounting purposes, resulting in no additional GRCL requirement.

2 In accordance with APRA regulations, the surplus in the Group’s defined benefit superannuation fund, net of any deferred tax liability, must be deducted from CET1.

60 Commonwealth Bank of Australia – Pillar 3 Report

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		31 Dec 20	Reconciliation
		Basel III	Table
		$M	Reference
APRA Specific Regulatory Adjustments
26	National specific regulatory adjustments (rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i, 26j)
26a	of which: treasury shares	15	Table A
26b	of which: offset to dividends declared due to a dividend reinvestment plan (DRP), to the
	extent that the dividends are used to purchase new ordinary shares issued by the ADI	–
26c	of which: deferred fee income	–
26d	of which: equity investments in financial institutions not reported in rows 18, 19 and 23	(4,432)	Table G
26e	of which: deferred tax assets not reported in rows 10, 21 and 25	(3,041)	Table D
26f	of which: capitalised expenses	(833)
26g	of which: investments in commercial (non-financial) entities that are deducted under APRA prudential requirements	(162)	Table G
26h	of which: covered bonds in excess of asset cover in pools	–
26i	of which: undercapitalisation of a non-consolidated subsidiary	–
26j	of which: other national specific regulatory adjustments not reported in rows 26a to 26i	(249)
27	Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1
	and Tier 2 to cover deductions	–
28	Total regulatory adjustments to Common EquityTier 11	(17,524)
29	Common EquityTier 1 Capital(APRA)	57,095
Additional Tier 1 Capital: instruments
30	Directly issued qualifying Additional Tier 1 instruments
31	of which: classified as equity under applicable accounting standards	–
32	of which: classified as liabilities under applicable accounting standards	10,695	Table E
33	Directly issued capital instruments subject to phase out from Additional Tier 1	130	Table E
34	Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by	–
	subsidiaries and held by third parties (amount allowed in Group AT1)
35	of which: instruments issued bysubsidiaries subject tophase out	–
36	Additional Tier 1 Capital before regulatoryadjustments	10,825	Table E
Additional Tier 1 Capital: regulatory adjustments
37	Investments in own Additional Tier 1 instruments	–
38	Reciprocal cross-holdings in Additional Tier 1 instruments	–
39	Investments in the capital of banking, financial and insurance entities that are outside the scope
	of regulatory consolidation, net of eligible short positions, where the ADI does not own more	–
	than 10% of the issued share capital (amount above 10% threshold)
40	Significant investments in the capital of banking, financial and insurance entities that are outside	–
	the scope of regulatory consolidation (net of eligible short positions)
41	National specific regulatory adjustments (rows 41a, 41b, 41c)	–
41a	of which: holdings of capital instruments in group members by other group members on	–
	behalf of third parties
41b	of which: investments in the capital of financial institutions that are outside the scope of	–
	regulatory consolidations not reported in rows 39 and 40
41c	of which: other national specific regulatory adjustments not reported in rows 41a and 41b	–
42	Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions	–
43	Total regulatoryadjustments to Additional Tier 1 capital	–
44	Additional Tier 1 Capital(AT1)	10,825
45	Tier 1 Capital(T1=CET1+AT1)	67,920
Tier 2 Capital: instruments and provisions
46	Directly issued qualifying Tier 2 instruments	15,533	Table F
47	Directly issued capital instruments subject to phase out from Tier 2	277	Table F
48	Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by
	subsidiaries and held by third parties (amount allowed in group Tier 2)	–
49	of which: instruments issued by subsidiaries subject to phase out	–
50	Provisions	2,061
51	Tier 2 Capital before regulatoryadjustments	17,871

1 Total regulatory adjustments to CET1 of $17,524 million in row 28 is net of APRA’s allowance for treasury shares held by the Group’s eligible employee share scheme trusts of $15 million as detailed in row 26a.

Commonwealth Bank of Australia – Pillar 3 Report 61

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		31 Dec 20	Reconciliation
		Basel III	Table
		$M	Reference
Tier 2 Capital: regulatory adjustments
52	Investments in own Tier 2 instruments	(30)
53	Reciprocal cross-holdings in Tier 2 instruments	–
	Investments in the Tier 2 Capital of banking, financial and insurance entities that are outside the
	scope of regulatory consolidation, net of eligible short positions, where the ADI does not own	(19)
54	more than 10% of the issued share capital (amount above 10% threshold)
	Significant investments in the Tier 2 Capital of banking, financial and insurance entities that are
55	outside the scope of regulatory consolidation, net of eligible short positions	–
56	National specific regulatory adjustments (rows 56a, 56b, 56c)
	of which: holdings of capital instruments in group members by other group members on
56a	behalf of third parties	–
	of which: investments in the capital of financial institutions that are outside the scope of
56b	regulatory consolidation not reported in rows 54 and 55	–
56c	of which: other national specific regulatoryadjustments not reported in rows 56a and 56b	–
57	Total regulatoryadjustments to Tier 2 Capital	(49)
58	Tier 2 Capital(T2)	17,822
59	Total Capital(TC=T1+T2)	85,742
60	Total risk weighted assets based on APRA standards	453,616
Capital ratios and buffers
61	CET1 (as a percentage of risk weighted assets)	12.6%
62	Tier 1 (as a percentage of risk weighted assets)	15.0%
63	Total Capital (as a percentage of risk weighted assets)	18.9%
64	Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of
	2.5% plus any countercyclical buffer requirements, expressed as a percentage of risk weighted	8.0%
	assets)
65	of which: capital conservation buffer requirement	3.5%
66	of which: ADI-specific countercyclical buffer requirements	–	Table H
67	of which: G-SIB buffer requirement (not applicable)	n/a
68	Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets)	12.6%
National minima
69	National Common Equity Tier 1 minimum ratio	–
70	National Tier 1 minimum ratio	–
71	National Total Capital minimum ratio	–
Amount below thresholds for deductions (not risk weighted)
72	Non-significant investments in the capital of other financial entities	862	Table G
73	Significant investments in the ordinary shares of financial entities	3,570	Table G
74	Mortgage servicing rights (net of related tax liability)	–
75	Deferred tax assets arising from temporary differences (net of related tax liability)	3,041	Table D
Applicable caps on the inclusion of provisions in Tier 2
76	Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap)	252
77	Cap on inclusion of provisions in Tier 2 under standardised approach	226
78	Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap)	1,835
79	Cap for inclusion of provisions in Tier 2 under internal ratings-based approach	2,153
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and
1 Jan 2022)
80	Current cap on CET1 instruments subject to phase out arrangements	–
81	Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)	–
82	Current cap on AT1 instruments subject to phase out arrangements	1,049
83	Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities)	–	Table E
84	Current cap on Tier 2 instruments subject to phase out arrangements	645
85	Amount excluded from Tier 2 due to cap (excess over capafter redemptions and maturities)	–	Table F

62 Commonwealth Bank of Australia – Pillar 3 Report

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APS 330 Table 19 – Summary comparison of accounting assets vs leverage ratio exposure measure

APS	330 Table 19 – Summary comparison of accounting assets vs leverage ratio exposure measure
		31 Dec 20
		Basel III
		APRA
		$M
1	Total consolidated assets as per published financial statements	1,057,734
2	Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation	(5,613)
3	Adjustment for assets held on the Balance Sheet in a fiduciary capacity pursuant to the Australian Accounting	–
	Standards but excluded from the leverage ratio exposure measure
4	Adjustments for derivative financial instruments	(5,915)
5	Adjustment for SFTs (i.e. repos and similar secured lending)	131
6	Adjustment for off Balance Sheet exposures (i.e. conversion to credit equivalent amounts of off Balance Sheet exposures)	96,029
7	Other adjustments	(17,318)
8	Leverage ratio exposure	1,125,048

APS 330 Table 18 – leverage ratio disclosure template

		31 Dec 20
		Basel III
		APRA
		$M
On Balance Sheet exposures
1	On Balance Sheet items (excluding derivatives and securities financing transactions (SFTs), but including collateral)	998,672
2	Asset amounts deducted in determiningTier 1 capital	(17,318)
3	Total On Balance Sheet exposures(excluding derivatives and SFTs)	981,354
Derivative exposures
4	Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin)	9,700
5	Add-on amounts for potential future credit exposure (PFCE) associated with all derivatives transactions	16,109
6	Gross-up for derivatives collateral provided where deducted from the Balance Sheet assets pursuant to the	–
	Australian Accounting Standards
7	(Deductions of receivables assets for cash variation margin provided in derivatives transactions)	–
8	(Exempted central counterparty (CCP) leg of client-cleared trade exposures)	–
9	Adjusted effective notional amount of written credit derivatives	726
10	(Adjusted effective notional offsets and add-on deductions for written credit derivatives)	(52)
11	Total derivative exposures	26,483
SFT exposures
12	Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions	21,051
13	(Netted amounts of cash payables and cash receivables of gross SFT assets)	–
14	CCR exposure for SFT assets	131
15	Agent transaction exposures	–
16	Total SFT exposures	21,182
Other Off Balance Sheet exposures
17	Off Balance Sheet exposure at gross notional amount	197,100
18	(Adjustments for conversion to credit equivalent amounts)	(101,071)
19	Other Off Balance Sheet exposures	96,029
Capital and total exposures
20	Tier 1 Capital	67,920
21	Total exposures	1,125,048
Leverage ratio
22	Leverage ratio(%)	6.0

Commonwealth Bank of Australia – Pillar 3 Report 63

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The following table provides details on the Group’s Balance Sheet and the Level 2 Regulatory Balance Sheet as at 31 December 2020.

			Level 2
	Group		Regulatory	Template/
	Balance		Balance	Reconciliation
	Sheet	Adjustment 1	Sheet	Table
	$M	$M	$M	Reference
Assets
Cash and liquid assets	63,019	(71)	62,948
Receivables due from other financial institutions	7,280	–	7,280
Assets at fair value through Income Statement	50,702	(285)	50,417	Table G
Derivative assets	32,398	–	32,398
Investment securities:				Table G
At amortised cost	4,391	–	4,391
At fair value through Other Comprehensive Income	89,672	–	89,672
Loans, bills discounted and other receivables	785,429	(5,152)	780,277
Investment in regulatory non-consolidated subsidiaries	–	670	670	Table G
Property, plant and equipment	5,468	–	5,468
Investment in associates and joint ventures	2,865	–	2,865	Table G
Intangible assets	6,943	761	7,704	Table C
Deferred tax assets	2,522	(260)	2,262	Table D
Other assets	5,428	(187)	5,241
Assets held for sale	1,617	(1,089)	528	Table G
Total assets	1,057,734	(5,613)	1,052,121
Liabilities
Deposits and other public borrowings	746,466	976	747,442
Payables due to other financial institutions	31,010	–	31,010
Liabilities at fair value through Income Statement	7,255	–	7,255
Derivative liabilities	33,482	–	33,482
Current tax liabilities	105	1	106
Deferred tax liabilities	224	–	224	Table D
Provisions	3,552	(297)	3,255
Debt issues	122,548	(5,263)	117,285
Bills payable and other liabilities	9,826	(348)	9,478
Loan capital	27,608	–	27,608	Table E
Liabilities held for sale	655	(302)	353
Total liabilities	982,731	(5,233)	977,498
Net assets	75,003	(380)	74,623
Shareholders' Equity
Ordinary Share capital	38,417	–	38,417	Row 1, Table A
Reserves	2,287	–	2,287	Row 3
Retainedprofits	34,294	(379)	33,915	Row 2
Shareholders' Equity attributable to Equity holders of the Bank	74,998	(379)	74,619
Non-controllinginterests	5	(1)	4	Table B
Total Shareholders' Equity	75,003	(380)	74,623

1 Reflects the deconsolidation of the insurance and funds management entities and those entities through which securitisation of the Group's assets are conducted. These entities are classified as non-consolidated subsidiaries by APRA and are excluded from the Level 2 Regulatory Consolidated Banking Group.

64 Commonwealth Bank of Australia – Pillar 3 Report

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The following tables provide additional information on the differences between the detailed capital disclosures template (Appendix 11.1) and the Regulatory Balance Sheet (Appendix 11.3).

and the Regulatory Balance Sheet (Appendix 11.3).
	31 Dec 20 Template
Table A	$M Reference
Share Capital
Ordinary Share Capital	38,417
Total per Balance Sheet (Ordinary Share Capital Internationally Comparable)1 TreasuryShares held bythe Group's employee share scheme trusts(APRA specific adjustment)	38,417 Row 1 15 Row 26a
Total Ordinary Share Capital and Treasury Shares(APRA)	38,432
	31 Dec 20 Template
Table B	$M Reference
Non-Controlling Interests Total per Balance Sheet1 Less other non controllinginterests not included in capital	4 (4)
Totalper Capital Template (APRA and Internationally Comparable)	– Row 5
	31 Dec 20 Template
Table C	$M Reference
Goodwill and Other Intangibles Total per Balance Sheet1 Less capitalised software and other intangibles separatelydisclosed in template	7,704 (1,707)
Totalper Capital Template - Goodwill(APRA and Internationally Comparable)	5,997 Row 8
Other intangibles (including capitalised software) per Balance Sheet Less deferred tax liabilityassociated with other intangibles	1,707 (65)
Totalper Capital Template - Other Intangibles(APRA and Internationally Comparable)	1,642 Row 9
	31 Dec 20 Template
Table D	$M Reference
Deferred Tax Assets Deferred tax assets per Balance Sheet1 Less deferred tax liabilities per Balance Sheet 1	2,262 (224)
Net Deferred Tax Assets2	2,038
Adjustments required in accordance with APRA prudential standards3 Deferred tax asset adjustment before applying prescribed thresholds (APRA specific adjustment) Less amounts belowprescribed threshold- risk weighted 4	1,003
	3,041 Row 26e (3,041) Row 75
Totalper Capital Template(Internationally Comparable)	– Row 10, 21, 25

1 Represents the balance per Level 2 Regulatory Balance Sheet.

2 Represents the balance of deferred tax assets net of deferred tax liabilities per Level 2 Regulatory Balance Sheet.

3 Represents the deferred tax balances associated with reserves ineligible for inclusion in regulatory capital, intangibles, and the impact of limitations of netting of balances within the same geographic tax authority.

4 The BCBS allows these items to be risk weighted at 250% if the balance falls below prescribed threshold levels. APRA require these to be deducted from CET1.

Commonwealth Bank of Australia – Pillar 3 Report 65

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	31 Dec 20 Template
Table E	$M Reference
Additional Tier 1 Capital Total Loan Capital per Balance Sheet1 Less fair value hedge adjustments2 Total Loan Capital net of issue costs at their contractual values Less amount related to Tier 2 Capital Instruments Total Tier 1 Loan Capital Add issue costs3 Less Basel III transitional relief amortisation for directly issued instruments4 LessBasel IIItransitional reliefamortisation for instrumentsissued by subsidiaries 4	27,608 (973)
	26,635 (15,860)
	10,775 50 – Row 83 – Row 83
Totalper Capital Template(APRA)	10,825 Row 36

Additional Tier 1 Capital Instruments comprises Basel III Complying Instruments PERLS VII	3,000
PERLS VIII PERLS IX PERLS X PERLS XI PERLS XII Basel III Non-Complying Instruments Other Instruments Less Basel III transitional relief amortisation for directly issued instruments4	1,450 1,640 1,365 1,590 1,650
	10,695 Row 32 130 – Row 83
	130 Row 33
Total Basel III Non Complying Instruments	130
Total Additional Tier 1 Capital Instruments(APRA)	10,825 Row 36

	31 Dec 20 Template
Table F	$M Reference
Tier 2 Capital Instruments Total included in Balance Sheet Less amount of Tier 2 debt issued by subsidiary ineligible for inclusion in the Group's Capital5 Add issue costs3 Less amortisation of instruments6 LessBasel IIItransitional reliefamortisation fordirectlyissuedinstruments 4	15,860 (80) 30 – – Row 85
Totalper Capital Template(APRA and Internationally Comparable)	15,810 Row 46, 47

1 Represents the balance per Level 2 Regulatory Balance Sheet.

2 For regulatory capital purposes, APRA requires these instruments to be included as if they were unhedged.

3 Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments are shown at face value. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the Detailed Capital Disclosures Template.

4 Basel III transitional arrangements apply to directly issued capital instruments and instruments issued by subsidiaries not compliant with the new Basel III requirements.

5 Represents notes issued by the Group through ASB, its New Zealand subsidiary. The amount of these notes that contributes to ASB capital in excess of its minimum regulatory requirements is not eligible for inclusion in the Group’s capital.

6 APRA requires these instruments to be amortised by 20% of the original amount during each of the last five years to maturity. This is in addition to Basel III transitional arrangements.

Details on the main features of Capital instruments included in the Group’s regulatory capital, (Ordinary Share Capital, Additional Tier 1 Capital and Tier 2 Capital) as required by APS 330 Attachment B can be found at Commbank.com.au/regulatorydisclosures

66 Commonwealth Bank of Australia – Pillar 3 Report

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	31 Dec 20 Template
Table G	$M Reference
Equity Investments Investment in commercial entities Investments in significant financial entities Investments in non-significant financial entities Equity investment in non-consolidated subsidiaries Total equity investments before applying prescribed thresholds APRA specific adjustment1 Less amountsrisk weighted under Internationally Comparable 2	162 Row 26g 2,900 Row 26d, 73 862 Row 26d,72
	3,924 670 Row 26d,73
	4,594
	(4,594)
Totalper Capital Template(Internationally Comparable)	– Row 18, 19, 23

1 Equity investments are classified in the Level 2 Regulatory Balance Sheet across Investments in Associates, Assets held for Sale, Investment Securities, Assets at Fair Value through Income Statement and Investment in non-consolidated subsidiaries. In addition, the Group has undrawn commitments (off Balance Sheet) which are deemed in the nature of equity for regulatory capital purposes.
2 The aggregate of investments in significant financial entities of $2,900 million, investments in non-significant financial entities of $862 million and equity investment in non-consolidated subsidiaries of $670 million is a total of $4,432 million and is included in row 26d in the Detailed Capital Disclosures Template. The BCBS allows for equity investments to be concessionally risk weighted provided they are below prescribed thresholds. APRA requires such items to be deducted 100% from CET1. The remaining balance of $162 million related to investments in commercial entities are risk weighted under Internationally Comparable methodology, with no prescribed threshold limits.

Countercyclical Capital Buffer

The CCyB, which is effective for Australian ADIs from 1 January 2016, represents an extension to the capital conservation buffer and may require an ADI to hold additional CET1 of up to 2.5%. The CCyB is calculated as the sum of the specific buffer set by APRA with respect to Australian private sector exposures and the weighted average for offshore private sector exposures where the CCyB has been enacted.

	RWA 2	Jurisdictional Buffer	ADI Specific Buffer 3	Template
Table H	$M	%	%	Reference
Country 1
Hong Kong	680	1.000%	0.001857%
Norway	719	1.000%	0.001963%
Luxembourg	140	0.500%	0.000191%
Others	364,482	0.000%	0.000000%
Total	366,021		0.004011%	Row 66

1 Represents country of ultimate risk as at 31 December 2020.
2 Represents total private sector (excludes Banks and Sovereigns) credit and specific market risk RWA. 3 Calculated as each country’s share of total private sector credit and specific market RWA multiplied by the CCyB applicable in each country.

Commonwealth Bank of Australia – Pillar 3 Report 67

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The legal entities included within the accounting scope of consolidation, but excluded from the Level 2 Regulatory Consolidated Group are detailed below.

The total assets and liabilities should not be aggregated as some of the entities listed are holding companies for other entities included in the table below.

in the table below.
	Total Assets	Total Liabilities
Entity name	$M	$M
(a) Securitisation
Medallion Trust Series 2017-1	1,109	1,111
Medallion Trust Series 2017-2	1,377	1,379
Medallion Trust Series 2018-1	1,635	1,638
Medallion Trust Series 2019-1	1,157	1,159
	Total Assets	Total Liabilities
Entity name	$M	$M
(b) Insurance and Funds Management
Avanteos Investments Limited	87	24
Avanteos Pty Ltd	–	–
CBA Captive Insurance Pte Limited	94	24
Colonial Mutual Superannuation Pty Ltd	–	–
Colonial Services Pty Limited	–	–
Commonwealth Custodial Services Pty Ltd	1	1
Commonwealth Insurance Limited	1,131	860
Colonial First State Investments Limited	1,011	465
Emerald Holding Company Pty Limited	–	–
Premium Alternative Investments Pty Limited	–	–
Premium Plantations Pty Limited	–	–
Premium Plantations Services Pty Ltd	–	–
St Andrew's Australia PtyLtd	–	–

68 Commonwealth Bank of Australia – Pillar 3 Report

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The following schedule lists the quantitative tables in this document as referenced in APS 330 paragraphs 12, 47 and Attachments A to H.

APS 330 Table	Title	Page No.
Para 12a	Regulatory Balance Sheet	64
Para 12b	Entities excluded from Level 2 Regulatory Consolidated Group	68
Para 12c and 12d	Reconciliation between Detailed Capital Disclosures Template and Regulatory Balance Sheet	65
Para 47	Summary Group Leverage Ratio	9
1	Detailed Capital Disclosures Template	60
1.2	Private sector credit exposures by geographic region	67
2	Main features of capital instruments1	n/a
5a	Total securitisation activity for the reporting period	53
5b	Summary of total securitisation exposures retained or purchased	53
6b to 6f	Basel III Capital Requirements (RWA)	10
6e	Capital requirements for operational risk	56
6g	Capital Ratios – Level 1 and Major Subsidiaries	7
7b	Credit risk exposure by portfolio type	16
7c	Credit risk exposure by portfolio type and geographic distribution	17
7d	Credit risk exposure by portfolio type and industry sector	18
7e	Credit risk exposure by portfolio type and residual contractual maturity	21
7f (i)	Impaired, past due, specific provisions and write-offs charged by industry sector	23
7f (ii)	Impaired, past due, specific provisions and write-offs charged by portfolio	26
7g (i)	Impaired, past due and specific provisions by geographic region	27
7g (ii)	GRCL by geographic region	27
7h (i)	Movement in collective provisions and general reserve for credit losses	28
7h (ii)	Movement in individual provisions and specific provisions	28
7i	Credit risk exposures by portfolio type and modelling approach	13
7j	General reserve for credit losses	22
8b	Exposures subject to standardised and supervisory risk weights	28
9b	Internal ratings structure for credit risk exposures and mapping to external ratings	30
9c	PD rating methodology by portfolio segment	30
9d (i)	Non-retail exposures by portfolio type and PD band	31
9d (ii)	Retail exposures by portfolio type and PD band	34
9e	Actual losses by portfolio type	37
9f (i)	Historical loss analysis by portfolio type	38
9f (ii)	Accuracy of risk estimates – PD	39
9f (iii)	Accuracy of risk estimates – LGD and EAD	39
10b and 10c	Credit risk mitigation	40
11b (i)	Counterparty credit risk derivative exposure under the SA-CCR method	42
11b (ii)	Counterparty credit risk derivative exposure	42
11c	Counterparty credit risk derivative transactions	43
12g (i)	Banking book exposures securitised – traditional securitisation	44
12g (ii)	Banking book exposures securitised – synthetic securitisation	44
12g (iii)	Total banking book exposures securitised	45
12h	Past due and impaired banking book exposures by asset type	45

1 Details can be found at Commbank.com.au/regulatorydisclosures.

Commonwealth Bank of Australia – Pillar 3 Report 69

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APS 330 Table	Title	Page No.
12i	Banking book exposures intended to be securitised	45
12j (i)	Banking book activity for the reporting period	46
12k	Banking book securitisation exposures retained or purchased	47
12l (i)	Banking book exposure by risk weighting	48
12l (ii)	Banking book exposure deducted entirely from capital	49
12m	Banking book exposures subject to early amortisation	49
12n	Banking book resecuritisation exposures	49
12o (i)	Trading book exposures securitised – traditional securitisation	49
12o (ii)	Trading book exposures securitised – synthetic securitisation	49
12o (iii)	Total trading book exposures securitised	49
12p	Trading book exposures intended to be securitised	49
12q	Trading book activity for the reporting period	49
12r	Trading book exposures subject to APS 116	49
12s	Trading book exposures retained or purchased subject to APS 120	50
12t (i)	Trading book exposures retained/purchased subject to IMA	50
12t (ii)	Trading book exposures subject to APS 120 by risk weighting	51
12u (i)	RWA of trading book exposures retained/purchased subject to IMA	51
12u (ii)	Capital requirements (RWA) of trading book exposures subject to APS 120 by risk weighting	52
12u (iii)	Trading book exposures entirely deducted from capital	53
12v	Trading book exposures subject to early amortisation	53
12w	Trading book resecuritisation exposures	53
13b	Traded Market Risk under the Standard Method	55
14f (i)	Value-at-Risk and Stressed Value-at-Risk for Trading Portfolios Under the Internal Model Approach	55
14f (ii)	Summary Table of the Number of Back-Testing Outliers	55
14f (iii)	Details of Back-Test	56
14f (iv)	Comparison of VaR estimates Outliers with actual gains/losses experiences	56
16b to 16f	Equity investment exposures	54
17b	Interest Rate Risk in the Banking Book	56
18	Leverage ratio disclosure template	63
19	Summary comparison of accounting assets vs leverage ratio exposure measure	63
20	LCR Disclosure Template	57
21	NSFR disclosure template	58
22	Remuneration disclosures1	n/a
23	Potential G-SIB disclosure template1	n/a

1 Details can be found at Commbank.com.au/regulatorydisclosures.

70 Commonwealth Bank of Australia – Pillar 3 Report

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Title/Description	Page No.
Summary Group Capital Adequacy Ratios (Level 2)	2
APS 330 reporting structure	3
Summary Group Capital Adequacy Ratios (Level 2)	6
Regulatory Capital Frameworks Comparison	8
Explanation of Change in Credit RWA	11
COVID-19 Loan Deferrals by Asset Category	12
Explanation of Change in Credit Risk Exposure	13
Reconciliation of Australian Accounting Standards and APS 220 based credit provisions	22
Other Assets risk weights	29
Traded Market Risk RWA by Modelling Approach	55
Regulatory RWA (IRRBB)	56

Commonwealth Bank of Australia – Pillar 3 Report 71

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Term	Definition
Additional Tier 1 Capital	Additional Tier 1 Capital is a concept defined by APRA and consists of high quality capital that essentially
(AT1)	provides a permanent and unrestricted commitment of funds, is freely available to absorb losses, ranks
	behind the claims of depositors and other more senior creditors in the event of a wind-up, and provides
	for fully discretionary capital distributions.
Authorised Deposit-	Authorised Deposit-taking Institutions are financial institutions that are authorised under the Banking Act
taking Institution (ADI)	1959 to carry on banking business in Australia, including accepting deposits from the public.
Advanced Internal	This approach is used to measure credit risk in accordance with the Group’s Basel III accreditation that
Ratings-based (AIRB)	allows the Group to use internal estimates of PD, LGD and EAD for the purposes of calculating
Approach	regulatory capital.
Advanced Measurement	This approach is used to measure operational risk in accordance with the Group’s Basel III accreditation
Approach (AMA)	that allows the Group to use its own internal model for the purposes of calculating regulatory capital.
Alternative Liquid Assets	Assets that qualify for inclusion in the numerator of the LCR in jurisdictions where there is insufficient
(ALA)	supply of HQLA.
ASB	ASB Bank Limited – a subsidiary of the Commonwealth Bank of Australia that is directly regulated by the
	RBNZ.
Australian Accounting	The Australian Accounting Standards as issued by the Australian Accounting Standards Board (AASB).
Standards
Australian Prudential	The Australian Prudential Regulation Authority is an independent statutory authority that supervises
Regulation Authority	institutions across banking, insurance and superannuation, and is accountable to the Australian
(APRA)	parliament.
Banking Book	The banking book is a term for assets on a bank’s Balance Sheet that are expected to be held to
	maturity, usually consisting of customer loans to and deposits from retail and corporate customers. The
	banking book can also include those derivatives that are used to hedge exposures arising from the
	banking book activity, including interest rate risk.
Basel II	Refers to the Basel Committee on Banking Supervision’s Revised Framework for International
	Convergence of Capital Measurement and Capital Standards issued in June 2006 and as subsequently
	amended.
Basel III	Refers to the Basel Committee on Banking Supervision’s framework for more resilient banks and banking
	systems issued December 2010 (revised June 2011) and Capital requirements for bank exposures to
	central counterparties (July 2012).
CBA	Commonwealth Bank of Australia – the head entity of the Group.
Central Counterparty	A clearing house that interposes itself between counterparties to contracts traded in one or more
(CCP)	financial markets, thereby ensuring the future performance of open contracts.
Collective Provision	All loans and receivables that do not have an individually assessed provision are assessed collectively
	for impairment. The collective provision is maintained to reduce the carrying value of the portfolio of
	loans to their estimated recoverable amounts. These provisions are reported in the Group’s financial
	statements in accordance with Australian Accounting Standards (AASB 9_Financial Instruments_).
Committed Liquidity	The RBA provides the Committed Liquidity Facility to participating ADIs under the LCR, as a shortfall in
Facility (CLF)	Commonwealth government and semi-government securities exists in Australia. ADIs can draw on the
	CLF in a liquidity crisis against qualifying securities pledged to the RBA. The amount of the CLF for each
	ADI is set by APRA annually.

72 Commonwealth Bank of Australia – Pillar 3 Report

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Term	Definition
Common Equity Tier 1	The highest quality of capital available to the Group reflecting the permanent and unrestricted
Capital (CET1)	commitment of funds that are freely available to absorb losses. It comprises ordinary share capital,
	retained earnings and reserves less prescribed deductions.
Corporate	Basel asset class - includes commercial credit risk where annual revenues are $50 million or more.
Countercyclical capital	The countercyclical capital buffer is an additional amount of capital that APRA can require ADIs to hold at
buffer (CCyB)	certain points in the economic and financial cycle. The primary purpose of the countercyclical capital
	buffer is to increase the resilience of the ADI sector during periods of heightened systemic risk.
Counterparty Credit Risk	The risk that the counterparty to a transaction could default before the final settlement of the
(CCR)	transaction's cash flows.
Credit Equivalent	The credit equivalent amount is a measure, prescribed by the regulator, to quantify credit risk for off
Amount	Balance Sheet instruments, such as interest rate derivatives. The credit equivalent amount of a market
	related off Balance Sheet transaction calculated using the current exposure method is the sum of current
	credit exposure and potential future credit exposure of these contracts.
Credit Valuation	The risk of mark-to-market losses related to deterioration in the credit quality of a derivative counterparty.
Adjustment (CVA) Risk
Exposure at Default	The extent to which a bank may be exposed upon default of an obligor.
(EAD)
Extended Licenced	An Extended Licensed Entity is comprised of an ADI and each subsidiary of an ADI as specified in any
Entity (ELE)	approval granted by APRA in accordance with Prudential Standard APS 222 “Associations with Related
	Entities.”
External Credit	For example: Moody’s Investor Services, S&P Global Ratings or Fitch Ratings.
Assessment Institution
(ECAI)
General Reserve for	APS 220 “Credit Quality” requires the Group to establish a reserve that covers credit losses prudently
Credit Losses (GRCL)	estimated, but not certain to arise, over the full life of all individual facilities making up the business of the
	ADI. Most of the Group’s collective provisions are included in the GRCL. An excess of required GRCL
	over the Group’s collective provisions is recognised as a deduction from CET1.
Group	Commonwealth Bank of Australia and its subsidiaries.
High Quality Liquid	Assets are considered to be high quality liquid assets if they can be easily and immediately converted
Assets (HQLA)	into cash at little or no loss of value.
Impaired Assets	Facilities are classified as impaired where there is doubt as to whether the full amounts due, including
	interest and other payments due, will be received in a timely manner.
Individual provisions	Provisions made against individual facilities in the credit-rated managed segment where there is
	objective evidence of impairment and full recovery of principal and interest is considered doubtful. These
	provisions are as reported in the Group’s Financial Statements in accordance with the Australian
	Accounting Standards (AASB 9_Financial Instruments_). Also known as individually assessed provisions
	or IAP.
Interest Rate Risk in the	Interest rate risk in the banking book is the risk that the Bank’s profit derived from Net Interest Income
Banking Book (IRRBB)	(interest earned less interest paid), in current and future periods, is adversely impacted from changes in
	interest rates. This is measured from two perspectives: firstly by quantifying the change in the net
	present value of the Balance Sheet’s future earnings potential, and secondly as the anticipated change
	to Net Interest Income earned over 12 months. This calculation is driven by APRA regulations with
	further detail outlined in the Group’s 30 June 2020 Basel III Pillar 3 report.

Commonwealth Bank of Australia – Pillar 3 Report 73

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Term	Definition
Level 1	The Parent Bank (Commonwealth Bank of Australia) and offshore branches (the Bank) and APRA approved
	Extended Licensed Entities.
Level 2	The level at which the Group reports its capital adequacy to APRA, being the Consolidated Banking Group
	comprising the ADI and all of its subsidiary entities other than the insurance and funds management entities
	through which securitisation of Group assets is conducted. This is the basis on which the report has been
	produced.
Level 3	The conglomerate group including the Group’s insurance and funds management businesses (the Group).
Leverage Ratio	Tier 1 Capital divided by total exposures, with this ratio expressed as a percentage.
Liquidity Coverage Ratio	The liquidity coverage ratio is a quantitative liquidity measure that is part of the Basel III reforms. It was
(LCR)	implemented by APRA in Australia on 1 January 2015. It requires Australian ADIs to hold sufficient liquid
	assets to meet 30 day net cash outflows projected under an APRA-prescribed stress scenario.
Loss Given Default	An estimate of the expected severity of loss for a credit exposure following a default event. Loss Given
(LGD)	Default represents the fraction of EAD that is not expected to be recovered following default.
Net Cash Outflows (NCO)	Net cash outflows in the LCR are calculated by applying prescribed run-off factors on liabilities and
	various off Balance Sheet exposures that can generate a cash outflow in the next 30 days.
Net Stable Funding Ratio	The net stable funding ratio more closely aligns the behaviour term of assets and liabilities. It is the ratio
(NSFR)	of the amount of available stable funding (ASF) to the amount of required stable funding (RSF). ASF is
	the portion of an ADI’s capital and liabilities expected to be a reliable source of funds over a one year
	time horizon. RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets
	and off Balance Sheet activities.
Other Assets	Basel asset class – primarily includes Cash, Investments in Related Entities, Fixed Assets and Margin
	Lending.
Other Retail	Basel asset class – primarily includes retail credit exposures not otherwise classed as a residential
	mortgage, SME retail or a qualifying revolving retail asset.
Past Due	Facilities are past due when a contracted amount, including principal or interest, has not been met when due
	or it is otherwise outside contracted arrangements.
Probability of Default	The likelihood that a debtor fails to meet its debt obligations or contractual commitments.
(PD)
Prudential Capital Ratio	The regulatory minimum CET1, Tier 1 and Total Capital ratios that the Group is required to maintain at all
(PCR)	times.
Qualifying Revolving	Basel asset class – represents revolving exposures to individuals less than $0.1m, unsecured and
Retail (QRR)	unconditionally cancellable by the Group. Only Australian retail credit cards qualify for this AIRB asset
	class.
RBA	Reserve Bank of Australia.
RBNZ	Reserve Bank of New Zealand.

74 Commonwealth Bank of Australia – Pillar 3 Report

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Term	Definition
Residential Mortgage	Basel asset class – retail exposures secured by residential mortgage property.
Risk Weighted Assets	The value of the Group’s on and off Balance Sheet assets are adjusted by risk weights calculated
(RWA)	according to various APRA prudential standards.
Scaling Factor	In order to broadly maintain the aggregate level of capital in the global financial system post
	implementation of Basel II, the Basel Committee on Banking Supervision applies a scaling factor to the
	RWA amounts for credit risk under the IRB approach of 1.06.
Securities Financing	APRA defines securities financing transactions as transactions such as repurchase agreements, reverse
Transactions (SFT)	repurchase agreements, and security lending and borrowing, and margin lending transactions, where the
	value of the transactions depends on the market valuation of securities and the transactions are typically
	subject to margin agreements.
Securitisation	Basel asset class – Group originated securitised exposures and the provision of facilities to customers in
	relation to securitisation activities.
SME Corporate	Basel asset class – Small and Medium Enterprise commercial credit risk where annual revenues are less
	than $50 million and exposures are greater than $1 million.
SME Retail	Basel asset class – Small and Medium Enterprise exposures up to $1 million that are not secured by
	residential mortgage property.
SME Retail Secured by	Basel asset class – Small and Medium Enterprise exposures up to $1 million that are partly or fully
Residential Mortgage	secured by residential mortgage property.
Sovereign	Basel asset class – primarily includes claims on Australian and foreign governments, central banks
	(including the RBA), international banking agencies and regional development banks.
Specialised Lending	Basel asset classes subject to the supervisory slotting approach and which include Income Producing
	Real Estate, object finance, project finance and commodity finance.
Specific Provisions	APS 220 “Credit Quality” requires ADIs to report as specific provisions all provisions for impairment
	assessed by an ADI on an individual basis in accordance with the Australian Accounting Standards and
	that portion of provisions assessed on a collective basis which are deemed ineligible to be included in the
	GRCL (which are primarily collective provisions on some defaulted assets).
Standardised Approach	An alternate approach to the assessment of credit, operational and traded market risk whereby an ADI
	uses external ratings agencies to assist is assessing credit risk and/or the application of specific values
	provided by regulators to determine RWA.
Stressed Value-at-Risk	Stressed Value-at-Risk uses the same methodology as VaR except that the historical data used is taken
(SVaR)	from a one year observation period of significant market volatility as seen during the Global Financial
	Crisis.
Term Funding Facility	A facility provided by the RBA to certain ADIs to support lending to Australian businesses.
(TFF)
Tier 1 Capital	Comprises CET1 and AT1.
Tier 2 Capital	Capital items that fall short of the necessary conditions to qualify as Tier 1 Capital.

Commonwealth Bank of Australia – Pillar 3 Report 75

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Term	Definition
Total Capital	Comprises CET1, AT1 and Tier 2 Capital.
Total Exposures (as	The sum of on Balance Sheet items, derivatives, SFTs and off Balance Sheet items, net of any Tier 1
used in the leverage	regulatory deductions that are already included in these items, as outlined in APS 110 “Capital
ratio)	Adequacy” Attachment D.
Trading Book	Exposures, including derivative products and other off Balance Sheet instruments, that are held either
	with a trading intent or to hedge other elements of the trading book.
Value-at-Risk (VaR)	Value-at-Risk is a measure of potential loss using historically observed market volatility and correlation
	between different markets.

76 Commonwealth Bank of Australia – Pillar 3 Report

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ASB Bank Limited — Audit Report / Information 2021

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Basel III Pillar 3

For further information contact:

Investor Relations

Group Capital Ratios

Leverage Ratio

Liquidity Coverage Ratio

Net Stable Funding Ratio

COVID-19 Impacts

Policy Framework

Policy Framework (continued)

Common Equity Tier 1 Capital

Tier 2 Capital

APRA

Reserve Bank of New Zealand (RBNZ)

Risk Weighted Assets

Total Risk Weighted Assets ($B)

Credit Risk RWA

Credit Risk Weighted Assets ($B)

Traded Market Risk RWA

Interest Rate Risk in the Banking Book (IRRBB) RWA

Operational Risk RWA

Explanation of Change in Credit RWA

Loan Deferrals by Asset Category

Explanation of Change in Credit Risk Exposure

Factors impacting the loss experience

Other Assets risk weights

Analysis of Losses

Accuracy of Risk Estimates

Probability of Default

Loss Given Default and Exposure at Default

APS 330 Table 11c – Counterparty credit risk derivative transactions

Provision of implicit support to securitisation pool

APS 330 Table 12g (iii) – Total banking book exposures securitised

APS 330 Table 12j (i) – Banking book activity for the reporting period

APS 330 Table 12l (i) – Banking book exposure by risk weighting

Capital Calculation Methods

Traded Market Risk Internal Model

Internal Model Approach – Back-test results

Countercyclical Capital Buffer

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ASB Bank Limited Audit Report / Information 2021