RBA report card cuts ASX grades on CHESS governance

afr.com:

The Reserve Bank has ordered ASX to “redouble its efforts” to improve its corporate governance and risk management culture after the company botched the upgrade of the equity market’s post-trading systems last year.

The central bank flagged concerns about ASX’s internal audit function as the exchange struggles to restore trust with the market.

ASX chief executive Helen Lofthouse.  Alex Ellinghausen

In a stern report card issued on Monday, the RBA downgraded its assessment of ASX’s management of its clearing and settlement system against its so-called financial stability standards, declaring it had only “partly observed” the requirements around governance, risk management and operational risk.

The central bank’s annual assessment will increase the pressure on the ASX board, chaired by Damian Roche, before its annual general meeting next week.

The RBA has called for ASX to implement new controls to deal with the “immediate risks” from the ageing, legacy CHESS system to ensure it can continue to service the market while a replacement system is built.

The RBA called for ASX to “remediate the relationship” between internal auditors and executives, including documenting how “clear lines of accountability” can be strengthened.

“It is critical, but largely fair,” ASX chief executive Helen Lofthouse told The Australian Financial Review.

“It was definitely a tough read, and I am taking it seriously. I gathered all our senior leaders at ASX this morning to brief them on the report. The recommendations touch many areas, and I want all leaders to be clear that we need to execute well to make sure this is all addressed. The bottom line is there is absolutely work to do, but we have the plans in place and are getting on with that