The Central Bank of the Philippines issued Circular No. 1210, revising the framework that governs how supervised financial institutions (BSFIs) appoint external auditors and how audit firms, partners and sole practitioners are admitted to and retained on the List of Selected External Auditors for BSFIs. The updated rules amend the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions and set out selection constraints, eligibility requirements, supervisory powers, and an updated process for excluding auditors from the list. BSFIs must engage an external auditor included in the central bank’s list and may only appoint an auditor in the same category or a higher category than the BSFI, with the appointed auditor also covering the BSFI’s trust department and relevant subsidiaries and affiliates. External auditors are classified into Groups A, B and C, with corresponding BSFI groupings that include, among others, universal and commercial banks, foreign banks and digital banks in Group A, and rural and cooperative banks, pawnshops, and remittance and foreign exchange dealers in Group C. Inclusion on the list is valid for five years or one year as determined by the central bank, and continuing inclusion is tied to periodic performance assessments, including the quality of audited financial statements and compliance with the framework. The Circular also specifies minimum qualification and track record thresholds by category, requires Professional Regulation Commission and Board of Accountancy accreditation, sets application processing fees of PHP 5,000 for individuals or partners and PHP 15,000 for audit firms, and strengthens audit engagement expectations, including contractual provisions allowing auditor disclosures to the central bank without breaching confidentiality. The enforcement framework allows directives and sanctions where a BSFI appoints an auditor not on the list or otherwise fails to comply, and the central bank may downgrade or exclude an auditor based on assessment outcomes. Updated exclusion guidelines require written notice and a 15-calendar-day opportunity to respond before exclusion is submitted for Monetary Board approval, with exclusion revoking remaining validity and barring audit and non-audit services for any BSFI, and with re-inclusion permitted after three or five years depending on the case. Transitional provisions allow auditors in good standing whose inclusion validity expired after the audit of 2025 financial statements to still audit 2024 financial statements, require applications covering audits of 2024 financial statements and thereafter to be filed with the Financial Supervision Sector, and permit previously suspended or delisted auditors to apply for re-inclusion after the applicable lapse period. The Circular takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation.
Central Bank of the Philippines 2025-02-17
Central Bank of the Philippines revises framework for selecting external auditors for BSP-supervised financial institutions
The Central Bank of the Philippines issued Circular No. 1210, revising the framework for appointing external auditors for supervised financial institutions (BSFIs). The updated rules amend regulations for banks and non-bank financial institutions, detailing selection constraints, eligibility requirements, and supervisory powers. The Circular outlines auditor classification, inclusion validity, performance assessments, and enforcement measures, including sanctions for non-compliance.