The Reserve Bank of Australia today released the 2024 Assessment of the ASX Clearing and Settlement (CS) Facilities. This assesses the performance of the ASX CS Facilities against the Bank's Financial Stability Standards (FSS).
The ASX CS facilities were rated as having 'observed' or 'broadly observed' many of the individual FSS.
The Bank assessed that the CS facilities 'partly observed' requirements under the specific FSS on Governance, Framework for the Comprehensive Management of Risks, and Operational Risk. Consistent with these ratings, the Bank's Assessment considers that the key areas of concern for ASX continue to be technology and cyber risks, and risk management.
The Bank acknowledges ASX's work to address the recommendations in the 2023 Assessment. These include improvements in ASX's governance arrangements and remediation of technology risks.
However, significant further work is required to ensure the Bank's key areas of concern are addressed. It is critical that the multiple large-scale technology projects currently underway, including CHESS Replacement, are managed in a way that supports stability of the financial system. A detailed review of ASX's operational risk management practices revealed that a fundamental uplift here is required. The Bank has also emphasised its expectations that regulatory reporting be delivered in a more timely, transparent and complete way. The Bank will be closely supervising how ASX manages these priorities in the period ahead.
The Bank has issued a number of recommendations, including that ASX should:
- continue to place high priority on remediating ageing technology assets
- reduce the complexity of vendor management frameworks and ensure that appropriate controls and processes are in place for all key vendors supporting the CS facilities
- complete an independent review of its internal strategy to address its overall heightened level of risk.
RBA Assistant Governor (Financial System) Brad Jones said, '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.'
Background
The Reserve Bank is responsible for the supervision of Australian-licensed CS facilities with a focus on financial stability and the reduction of systemic risk. Systemically important CS facilities are assessed on a regular basis against the Financial Stability Standards (FSS) determined by the Bank.
The Bank conducts annual assessments of ASX's four CS facilities: 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. These assessments include a rating of the CS facilities' observance against each financial stability standard.
For more information on the Bank's approach to assessing CS facilities, see: The Reserve Bank's Approach to Supervising and Assessing Clearing and Settlement Facility Licensees.
ASIC has separate, but complementary, responsibilities for the supervision of CS facilities. In carrying out supervision of CS facilities, the RBA works closely with ASIC.
