ASX still falling short of RBA's expectations

The Reserve Bank of Australia's (RBA) annual assessment of the ASX's clearing and settlement (CS) facilities has found the market operator is still not meeting the mark.

The ASX CS facilities were rated as having 'observed' or 'broadly observed' many of the individual Standards, but the RBA assessed one or more of the CS facilities 'partly observed' the requirements under the Standards on Governance, Framework for Comprehensive Management of Risks, Credit Risk, and Operational Risk.

"ASX is undergoing a period of substantial organisational change in response to several long-running issues. Ensuring that the organisational reset allows ASX to discharge its unique responsibilities in Australia's financial system will take sustained commitment and focus," RBA assistant governor (financial system) Brad Jones said.

"This assessment highlights that, despite progress during the year, ASX is still not meeting the RBA's expectations in several important areas. The challenge now for ASX is to demonstrate that it can successfully deliver the transformation program without compromising the safe and reliable operation of its critical infrastructure."

The RBA acknowledged that during the year, ASX established a Transformation Portfolio intended to address longstanding shortfalls in governance, capability, culture and risk management, and said if the ASX were to meet the clear expectations the RBA set out, it would create a pathway to meet the standard expected of an operator of critical market infrastructure.

The RBA said ASX strengthened CHESS resourcing and contingency arrangements following the December 2024 batch settlement incident. As a result, the RBA upgraded ASX Clear and ASX Settlement from 'not observed' to 'partly observed' against the Operational Risk Standard.

The central bank said the upgrades recognise specific improvements to CHESS and do not indicate an assessment of broader improvement in ASX's management of operational risk.

"The ASIC Inquiry into ASX Group confirmed the existence of longstanding and deeply embedded shortcomings across ASX, consistent with themes identified in previous RBA assessments. These shortcomings include ASX compromising the resilience of its critical market infrastructure in pursuit of high shareholder returns," the RBA assessment said.

"The ASIC Inquiry concluded that barriers in ASX's governance, capability and culture required a fundamental reset. ASX subsequently committed to a package of actions, including a strategic reset of its Accelerate program. The resulting ASX Transformation Portfolio is intended to address these underlying issues. It is imperative that the transformation delivers sustained improvements in ASX's governance, capability, culture and risk management."

In response to the RBA's report, ASX chief executive Anthony Attia acknowledged more work needs to be done.

"The RBA's assessment recognises the progress ASX has made, including stronger CHESS resilience, the safe delivery of CHESS Release 1 and improved ratings across several areas of clearing and settlement. It also makes clear that there is more work to do," Attia said.

"Our focus is on delivering the improvements we have committed to through our technology and transformation initiatives, and on continuing to rebuild trust through consistent execution."