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Friday, September 22, 2023

Reforming the Vatican Bank

In a previous two-part article (“Should priests be allowed to marry”), I said that while the Vatican may be open to reviewing the current policy on celibacy,  we should not expect changes to happen anytime soon.


The matter of celibacy is simply not a priority.   Instead, Pope Francis has zeroed in on two priority issues which need to be urgently addressed. These are: 1.)  a more thorough investigation of alleged sexual misconduct within the Church and 2.) reforming the Vatican Bank.


The good Pontiff  set  his timetable  to commence as soon as he returned from his historic trip to the troubled Middle East.  While no immediate action has been announced with regards to the first issue,  Pope Francis opened his salvo with regards to the second  by firing  the 5-man board of the Financial Information Authority, the “watchdog” of the Vatican Bank.


A Reuters report said: “All five outgoing members were Italians…associated with the Vatican’s discredited financial old guard”.  


In their place, Pope Francis  appointed non-Italians, all  highly regarded professionals, (including 1 woman) with individual expertise in law, banking,  running philantrophic organizations (not the Napoles type)  and insurance.


The Financial Information Authority was created by  Pope Emeritus Benedict XVI in 2011 in response to increasing  concerns of the European financial community that the Vatican Bank had other more worldly activities.


What is the Vatican Bank and why has it become the subject of  increasingly closer scrutiny?


Founded in 1942, the  Vatican Bank (officially known as the Institute for Works of Religion) aims “to provide for the safekeeping of movable and immovable property transferred or entrusted to it by physical or juridical persons and intended for works of religion and charity”.


The bank is housed in a small round tower at the foot of the Apostolic Palace. That is  a mere spitting distance from where Pope Emeritus Benedict XVI and   Popes (now Saints) John Paul II and John XXIII resided and held office.


The bank’s clientele is supposed to be limited to what we call in local banking parlance as a “well defined group”. Only religious institutions, clerics and diplomats accredited to the Vatican are allowed to hold accounts there.


Unlike a conventional bank, the Vatican Bank  does not give loans.  But to grow its assets, it invests in securities. It also had a substantial equity holding in the collapsed Banco Ambrosiano.


Because so little is known about the bank’s daily operations and transactions, it has often been called “the most secret bank in the world.”  It was only in 2011,  (69 years after it was established) and only after mounting pressure from the international financial community, that its operations  have been made public. 


The cryptic 2011 report said the bank had 20,772 clients with 33,000 accounts. 68 per cent of the clients are members of the clergy. The report also indicated that it had US Dollar 8 billion under management.


It took another two years before the bank launched its own website where it also published its first-ever annual report.


It is no wonder that because of the secrecy with which it operated, the bank had often found itself at the center of controversy, intrigue and scandal. 


In 1968, the Vatican Bank hired a financial advisor, whose own bank’s failure in 1974 reportedly caused the Vatican losses amounting to 35 billion Italian Lira.


In 1982, an Italian court issued a warrant of arrest against an Archbishop for allegedly being an accessory in the fraudulent bankruptcy of Banco Ambrosiano where the Vatican Bank had substantial holdings.


The murder of the chairman of Banco Ambrosiano (whose body  was found hanging under a London bridge) became the subject of the plot of  the movie Godfather III.


But  of  late, investigators have also  been uncovering with regularity cases of  deposit accounts allegedly being used   by outsiders  to  launder  money or to avoid taxes.


To the credit of  Pope Francis and  his immediate predecessor Pope Emeritus Benedict XVI,  the Vatican Bank  now appears headed for  greater transparency.  


In itself, the publication of the its annual report  is  a significant milestone but as one  observer notes: “ With regards to meeting international norms,  the Vatican Bank still has some way to go.”


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