RBA Slams ASX Over Risk Management and CHESS Failures

RBA’s Scathing Letter to ASX: Why It’s Time for Accountability and Urgent Reform

In a confidential but revealing development, the Reserve Bank of Australia (RBA) has formally warned the Australian Securities Exchange (ASX) that it has “lost confidence” in the exchange’s ability to manage critical market infrastructure. The September 2024 letter, addressed to ASX CEO Helen Lofthouse, exposed the central bank’s deep dissatisfaction with the exchange’s failure to proactively resolve risk-related issues—an indictment that raises serious questions about the reliability of one of Australia’s most important financial institutions.

The Core of the Issue: CHESS and Systemic Fragility

At the heart of the RBA’s concern is CHESS—the Clearing House Electronic Subregister System—Australia’s decades-old infrastructure responsible for clearing and settling equity transactions. CHESS has long been the target of criticism due to its antiquated architecture and operational risks. While there were grand plans to replace CHESS with a blockchain-based platform (first proposed in 2015), this was ultimately abandoned in 2022 after consistent delays, internal dysfunction, and technical misfires, costing ASX investors $250 million in write-downs.

Instead, the exchange is now pursuing a more basic upgrade, expected as late as 2028–29—a timeline that has left many market participants, and now the RBA, exasperated.

A Culture of Compliance—Not Risk Management

In what may be the most damning section of Assistant Governor Brad Jones’ letter, the RBA accuses the ASX of having an “entrenched culture” that views regulatory compliance as a box-ticking exercise, rather than a genuine attempt to mitigate systemic risks. This criticism follows repeated failures to proactively inform regulators about material developments—an omission the RBA views as a “serious matter” that erodes regulatory trust.

The letter came just two months before a December 2024 outage that triggered widespread market panic, where trades could not be settled—paralysing brokers and putting pressure on cash flow and financing arrangements.

Repeated Failures and Regulatory Downgrades

In the aftermath of that December outage, the RBA publicly downgraded the ASX’s compliance with operational risk standards from “partly observed” to “not observed”—a harsh but telling decision. The corporate watchdog, ASIC, has also weighed in, initiating legal proceedings against the ASX over its CHESS-related disclosures and demanding an independent review of its systems.

The resignation of the ASX’s Chief Risk Officer, Hamish Treleaven, and his replacement with Westpac executive Dirk McLiesh, further underscores the urgency to address leadership and cultural change. But is it too little, too late?

What This Means for Brokers, Investors, and the Broader Market

As a non-bank lender and finance partner working with brokers, developers, and wholesale clients, I’ve seen firsthand how fragile market infrastructure can disrupt not only liquidity but confidence. The fact that high-volume trading days—such as during the Trump tariff announcement or the early COVID-19 sell-offs—can cause the ASX to grind to a halt is unacceptable in 2025. Brokers operate on thin margins and fast-moving windows; they cannot afford system lags or settlement delays.

What’s most concerning is not just the technical failures, but the apparent systemic complacency. In a world increasingly threatened by cyber risks and digital vulnerabilities, infrastructure resilience should be the cornerstone of market integrity—not its Achilles heel.

Where To From Here?

The ASX has an obligation not just to shareholders but to every participant in the Australian financial system. The RBA’s public rebuke sends a strong signal that reforms must be meaningful and urgent. Delays until 2028 or 2029 are simply not good enough. The market deserves—and requires—a faster, more transparent path to a modernised clearing and settlement system.

As lenders and brokers, we must also advocate for stronger risk controls, better communication channels with our market operators, and demand accountability from institutions that hold monopoly-like positions in Australia’s financial plumbing.

Final Thoughts

The ASX’s troubles should serve as a wake-up call. The Reserve Bank’s intervention is more than a bureaucratic letter—it’s a rare and serious warning about the fragility of our financial infrastructure. It also raises a broader question: how many other “legacy systems” are hiding in plain sight within our financial markets?

At Renown Lending, we believe that transparency, agility, and risk awareness are non-negotiables—not optional extras. Let’s hope the ASX can learn the same lesson before another outage brings markets to a halt.