Question & AnswerQ&A (BSP CIRCULAR NO. 488)
Banks may outsource functions such as data imaging, clearing and processing of certain checks, printing of deposit statements, credit card services, credit investigation and collection, property appraisal and management, internal audit (subject to specific conditions), marketing loans and other bank products without account opening, general bookkeeping excluding inherent banking functions, offsite records storage, front/back office functions between parents and subsidiaries under conditions, and other activities as determined by the Monetary Board.
Banks outsourcing internal audit must ensure: board and senior management retain responsibility and oversight; external service provider is an independent auditor on the BSP list or a parent company meeting requirements; contracts do not exceed five years; contingency plans exist for audit continuity; service agreements define rights, scope, fees, regulatory review access, independence of auditor, data confidentiality, ownership of audit reports, and termination protocols.
No. Banks may outsource marketing of loans, deposits, and other products but not the actual opening of deposit accounts.
Functions such as printing non-deposit related statements and promotional materials, transfer agent services, messenger/courier/postal services, security guard services, vehicle service contracts, janitorial services, certain public relations and staffing services (excluding banking functions), sorting and bagging currency notes and coins, maintenance of computer hardware, payroll for bank employees, telephone operator services, sale/disposal of acquired assets, personnel training, building and facilities maintenance, and other activities determined by the Monetary Board.
The contract or service agreement with the external auditor shall not be entered into for a period longer than five (5) years.
No. The external service provider must not perform management functions, make management decisions, act or appear as management, and must comply with professional and regulatory independence guidelines.
BSP examiners must be granted full and timely access to internal audit reports and related working papers of the outsourced internal audit service.
Conditions include certification limiting outsourced front office functions to trade support only, maintenance of parent-subsidiary relationship with service provider servicing only business group entities, no outsourcing of deposit-related banking functions, submission of a Service Level Agreement detailing responsibilities and confidentiality, and compliance with all other Section requirements upon breach.
The outsourcing provisions in Section X169 and subsections of the Manual of Regulations for Banks (MORB) applicable to quasi-banks and non-bank financial institutions are incorporated into the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).
This Circular took effect fifteen (15) days following its publication either in the Official Gazette or in a newspaper of general circulation.