The Australian Prudential Regulation Authority (APRA) has made the decision to reduce Commonwealth Bank's additional capital requirement by half after improving governance concerns.
The $1 billion capital add-on has been halved to $500 million with immediate effect and increases CBA's common equity tier one capital by 17 basis points.
APRA imposed the additional capital requirement on the bank in May 2018 as part of its response to the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia.
APRA's inquiry found that CBA's financial success "dulled the senses of the institution" in relation to the management of non-financial risks including governance, accountability and risk culture frameworks, practices and outcomes.
In addition to the $1 billion add-on, APRA gave CBA an enforceable undertaking which required a remedial action plan with an independent reviewer to check the progress.
The corporate regulator said the latest report from independent reviewer showed "significant progress" in executing the remedial action plan.
The remaining $500 million requirement will remain in place until the bank finalises all matters covered by the report and following APRA's validation in assessing the improvements.
CBA chief executive Matt Comyn welcomed APRA's acknowledgement of the progress the bank has made over the last two years.
"At the same time, we and APRA recognize there is still a substantial amount of work to do before our remedial action plan is fully implemented and embedded across CBA," he said.
"We remain committed to achieving these outcomes and to ensuring the improvements to strengthen governance, accountability and risk culture frameworks, practices and outcomes are sustained."