Regulatory capital treatment of IMB ordinary shares

September 28, 2016

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As advised by the Chairman at the 2015 AGM, following the amendment of the prudential compliance framework for capital instruments arising out of the Basel III regime, APRA commenced a review of the regulatory capital treatment of IMB’s ordinary shares against the requirements of APS 111 Capital Adequacy.

Following an extended period of engagement, APRA has determined that IMB’s ordinary shares will maintain their current regulatory capital treatment of Common Equity Tier 1 (CET1) only until 1 January 2025. APRA has determined that IMB’s ordinary shares do not fully comply with the requirements of APS 111 and, from 1 January 2025, the ordinary shares on issue will therefore cease to be recognised as regulatory capital.

This transitional period is consistent with the period over which IMB intends to continue the buyback of all ordinary shares on issue.

IMB has maintained the view that its ordinary shares meet the requirements of the prudential standards to be recognised as CET1. However, after an exhaustive consultation process, IMB will accept APRA’s determination.

IMB is currently well capitalised, with a Capital Adequacy Ratio at 30 June 2016 of 16.9% and a Tier 1 Ratio of 13.9%. The ordinary shares represent an absolute 1.8% of IMB’s total Capital Adequacy Ratio and as such IMB has sufficient capital to remain above its prescribed capital requirements including, theoretically, if the change in regulatory capital treatment was to occur immediately. For the avoidance of doubt, the change in the regulatory capital treatment of the ordinary shares will not occur until 1 January 2025.

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