BSP raises the bar on internal audit for PHL banks

The Bangko Sentral ng Pilipinas (BSP) has strengthened the guidelines for banks and other financial institutions to meet international standards and best practices on internal audit and controls.

 

In a statement Friday, the BSP said the Monetary Board approved the revised guidelines on internal control and internal audit, raising the bar of control standards for financial institutions (FIs). 

 

The guidelines feature the fundamental elements of internal control, namely management oversight and control culture, risk recognition and assessment, control activities, information and communications, and monitoring activities and correcting deficiencies.

 

"These effectively broaden the regulatory expectations on internal control from previously being limited only to the implementation of basic internal control activities to promoting shared accountability of the board and personnel at all levels in the control process," the central bank said.

 

FIs are expected to adopt internal control frameworks suited to their respective sizes, risk profiles and complexities of operations as the Monetary Board recognizes that there is no “one-size-fits- all” internal control framework.

  

The guidelines also cover central bank expectations on internal audit, with the BSP highlighting how its role is both to assess and complement operational management, risk management, compliance and other control functions. 

 

"FIs are generally allowed to outsource the internal audit function to have access to certain areas of expertise or address resource constraints provided that the scope of audit will not include areas that are covered by existing statutes on deposit secrecy," the BSP said.

 

"The guidelines, however, clarified that arrangements – where FIs that are part of group structures will opt to establish an internal audit function centrally in the parent bank – will not fall under the outsourcing framework provided under existing regulations," it added.

 

The revised standards widened the qualifications of the head of the internal audit to include disciplines outside of the accountancy profession. 

 

Certified Public Accountants (CPAs) or Certified Internal Auditors (CIAs) are required for the head of the internal audit of a universal and commercial bank.

 

On the other hand, the head of the internal audit of thrift, rural, and cooperative banks may be a graduate of any accounting, business, finance, or economics course but should have the technical proficiency in conducting an internal audit. 

 

"Regardless of academic background, heads of the internal audit function of all supervised FIs should meet the prescribed number of years of experience," the central bank said. – Danessa O. Rivera/VS, GMA News