The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), approved the guidelines allowing the outsourcing of the internal audit function among other banking functions that may be outsourced by banks and other non-bank financial institutions under BSP supervision.
The practice of outsourcing has become increasingly commonplace in recent years especially in the United States, Canada and Europe. Organizations have decided to focus on their core business activities and those within their areas of expertise. Company functions that are not regarded as core have been outsourced to external service providers with the necessary training and experience. 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. It allows better access to, and use of, specialized skills and best practices while respecting confidentiality requirements. An external service provider can draw upon a much larger pool of capabilities in diverse areas such as information technology and regulatory compliance.
Under the new guidelines, 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 fifty percent (50%) of the capital stock of the outsourcing entity.
Moreover, the new regulations clarified the banking functions, services and activities that may be outsourced with or without prior approval of the Monetary Board. Banking services such as transfer agent services, public relations services, temporary staffing, payroll, and several other support services may now be outsourced to third-party service providers without the prior approval of the Monetary Board.