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  • The Commonwealth Bank of Australia has issued US$2.5 billion worth of subordinated notes to increase capital reserves
  • APRA said banks were required to lift their total capital by three percentage points of risk-pointed assets by January 1, 2024
  • In July, Commonwealth told lenders it needs to strengthen capital to act as a buffer

The Commonwealth Bank of Australia has issued US$2.5 billion worth of subordinated notes to increase capital reserves.

The Australian Prudential Regulation Authority (APRA) said banks were required to lift their total capital by three percentage points of risk-pointed assets by January 1, 2024.

The initial proposed points was between four to five percentage points.

APRA also said that Australian banks will need to raise an extra $50 billion of ‘tier-two’ bonds by 2024, as part of its new total loss absorbing capital rules.

In July, Commonwealth told lenders it needs to strengthen capital to act as a buffer.

“The issue of subordinated notes by CBA will not have a material impact on CBA’s financial position,” the company said.

The US$1.2 billion 3.6 per cent subordinated notes are due in 2034 while the US$1.2 billion 3.7 per cent subordinated notes due are in 2039.

Commonwealth is one of Australia’s biggest banks and is the leading provider of integrated financial services.

APRA said last month, Australia’s biggest banks will only be allowed to have 25 per cent of tier-one capital and core funds to help absorb losses from January, 2021.

This is down 25 per cent from the original percentage.

Other banks have also issued similar bonds in the recent months, such as National Australia Bank raising US$1.5 billion through subordinated notes.

“The subordinated notes will be unsecured, direct and subordinated obligations
and will rank pari passu with equal ranking Ssecurities,” the company stated.

The notes will be issued in a global book entry form represented by a global security registered in name of a depositary.

Commonwealth Bank of Australia has gained 0.93 per cent today and is currently selling shares at $81.35 apiece at 12:37 pm AEST.

CBA by the numbers
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