The Reserve Bank of Australia has released its 2024 Assessment of the ASX Clearing and Settlement (CS) Facilities. This evaluation measures the performance of the ASX CS Facilities against the Bank's Financial Stability Standards (FSS).
The assessment found that many individual FSS were either "observed" or "broadly observed" by the ASX CS facilities. However, some requirements under specific FSS on Governance, Framework for the Comprehensive Management of Risks, and Operational Risk were only "partly observed." According to the Bank’s assessment, key areas of concern for ASX include technology and cyber risks, as well as risk management.
The Bank recognized ASX's efforts to address recommendations from the 2023 Assessment. These improvements include better governance arrangements and remediation of technology risks. Despite these advancements, significant further work is needed to address critical concerns. The Bank stressed that ongoing large-scale technology projects, such as CHESS Replacement, must be managed in a way that supports financial system stability.
A detailed review revealed that ASX needs substantial improvement in operational risk management practices. The Bank also emphasized its expectations for more timely, transparent, and complete regulatory reporting. The RBA will closely monitor how ASX manages these priorities moving forward.
The RBA issued several recommendations for ASX:
- Continue prioritizing the remediation of aging technology assets.
- Reduce complexity in vendor management frameworks and ensure appropriate controls are in place for all key vendors.
- Complete an independent review of its internal strategy to address overall heightened risk levels.
RBA Assistant Governor (Financial System) Brad Jones stated: "We acknowledge the work that ASX has undertaken over the past year to address the Bank’s previous recommendations, which has had to occur while ASX has undertaken significant technology modernisation projects including CHESS Replacement. However, the Bank’s Annual Assessment has reinforced the importance of ASX strengthening its risk culture and overall framework for managing risk. This is a fundamental requirement for an entity that runs critical national financial infrastructure. There is more work to do here."
The Reserve Bank supervises Australian-licensed CS facilities with a focus on financial stability and reducing systemic risk. It conducts annual assessments of four CS facilities operated by ASX: two central counterparties –ASX Clear Pty Limited and ASX Clear (Futures) Pty Limited –and two securities settlement facilities –ASX Settlement Pty Limited and Austraclear Limited.
ASIC holds separate but complementary responsibilities for supervising CS facilities and works closely with RBA in this capacity.