UPDATE 2-Birmingham, Ala. finances stable, acting mayor says

* City finance director resigns over budget discrepancy

* Previous mayor convicted of fraud last week

* Jefferson County faces multibillion dollar debt (Adds quote, paragraph 3, detail)

By Verna Gates

BIRMINGHAM, Ala., Nov 3 (Reuters) - The finances of Alabama's biggest city, Birmingham, are stable despite the resignation of its finance director in the wake of a corruption scandal, the city's acting mayor said on Tuesday.

Finance chief Steve Sayler resigned late Monday over $20 million discrepancy in the city's budget for the current fiscal year, Acting Mayor Carole Smitherman said.

"Our city is in sound financial condition. Both the citizens of Birmingham and the national rating services can stand assured that Birmingham is sound," said Smitherman.

His departure raised further questions about Birmingham's finances after former mayor Larry Langford was found guilty last week of charges ranging from bribery to fraud.

Smitherman told a city council meeting she had reassured credit ratings agencies after they called to ask about city finances following the Langford verdict.

"The city council cannot be responsible for budgets passed with incomplete and misleading information," she said.

Birmingham is the main city in Jefferson County, a region that has teetered on the edge of what would be the largest municipal bankruptcy in U.S. history over a multibillion dollar sewer system debt accumulated earlier this decade.

Jefferson County accumulated its sewer debt when Langford was head of the county commission.

Birmingham has $160 million in reserve and $41 million held back for debt service. Its total annual budget is $415 million, Smitherman said. The city's legal debt limit is $575 million and its current debt stands at $208 million.

(Writing by Matthew Bigg; Editing by Kenneth Barry)