The Bangko Sentral ng Pilipinas (BSP) is reviewing its accreditation procedures for external auditors after what happened to the controversial Legacy Group of rural banks.

A BSP source, requesting anonymity, said the supervision and examination sector is preparing a study of the performance of all the accredited auditors currently in its list.

The objective, said the source, is to purge this list and to disqualify erring external auditors.

The BSP require banks to publish their statement of condition on quarterly basis. They also require banks to hire external auditors to audit their books annually.

As of end August, the central bank had accredited 176 external auditors for universal, commercial, thrift, rural and cooperative banks. There were only eight accredited external auditors for commercial and universal banks.

Last September, the Philippine Deposit Insurance Corp. announced that it was investigating the external auditors of the 12 Legacy-affiliated rural banks that the BSP closed down last December. This was after a forensic audit revealed that these banks had overvalued their assets by P18.96 billion.

PDIC President Jose Nograles said external auditors have a liability in what happened to the rural banks.

PDIC executive vice president Imelda Singson said the Legacy rural banks only had P856 million in estimated realizeable value of assets as against P19.82 billion they claimed in their statement of condition as of the takeover date.

This means that there will be no recoveries for PDIC and that uninsured depositors cannot get their money because there is nothing to distribute, Singzon explained.

PDIC said the closed rural banks estimated insured deposits amounts to P14 billion while the potential pay out is P10.7 billion.

At the time of the PDIC takeover, the 12 banks declared P19.8 billion of assets in their statements of condition while about P22.1 billion were liabilities.

Singzon said the assets were overvalued by P18.97 billion and the liabilities were bloated by P4.61 billion. The biggest overvaluation was on the foreclosed assets which the Legacy group declared at P7.14 billion which the forensic audit showed to be worth only P285.78 million for an overvaluation of P6.86 billion.