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Banks allowed to job out audit function |
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By Des Ferriols
The Philippine Star 06/28/2005 The Bangko Sentral ng Pilipinas (BSP) has allowed local banks to outsource their internal audit functions to accredited independent external auditors. The Monetary Board of the BSP approved the set of guidelines allowing banks and non-bank financial institutions to outsource audit and other functions to external institutions or to a parent company owning over 50 percent of its stocks. According to the BSP, the practice of outsourcing has become increasingly commonplace and it decided to allow banks to focus on their core activities. "Company functions that are not regarded as core have been outsourced to external service providers with the necessary training and experience," the BSP said. The BSP admitted that economies of scale result in cost savings for the same services or improved services for the same cost. "Outsourcing may be more cost-effective than employing internal staff and flexibility in staffing leads to better resource allocation," the BSP said. Moreover, the BSP admitted that an external service provider could draw upon a much larger pool of capabilities in diverse areas such as information technology and regulatory compliance. Under the new guidelines, the BSP said banks and non-banks may outsource the internal audit function to an external independent auditor included in the list of BSP–selected external auditors or to a parent company which owns or controls more than 50 percent of the capital stock of the outsourcing entity. The new BSP regulation indicated that banks and non-bank financial institutions will be allowed to outsource certain functions without prior Monetary Board approval. These services include transfer agency, public relations, temporary staffing, payroll and several other support services. These services, according to the BSP, could be outsourced to third-party services providers. However, the BSP said it would still require prior Monetary Board approval for the outsourcing of such services as credit investigation and collection, property appraisal and management, credit card services and internal audit. |
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