The outlook on ASB Bank's debt rating was lowered by Fitch Ratings following a damning report into the culture and governance of its parent Commonwealth Bank of Australia (CBA).
The outlook on ASB's AA- long-term foreign and local currency debt ratings was cut to 'negative' from 'stable' after the Australian Prudential Regulation Authority (Apra) report released late last month criticised CBA for a myriad of issues ranging from executive pay to failing to respond to customer complaints. It made 35 recommendations.
Fitch senior director Tim Roche told BusinessDesk there was a risk that CBA's management might take its eye off the ball in terms of day-to-day financial performance of the bank, as it concentrated on sorting out shortcomings in operational controls and governance brought up in the Apra investigation.
"A likely cost increase might manifest in a weaker financial profile... There is also a risk that ongoing inquiries into the sector, including the Royal Commission, identify additional shortcomings," Roche said.
This could leave CBA "more susceptible than its peers to a weaker operating environment".