Pope Francis is set on clearing up the Vatican’s finances

Vatican bank clean-up wipes out profit for 2013



Pope Francis is set on clearing up the Vatican’s finances
The Vatican bank has seen its 2013 profit almost wiped out largely due to a clean-up process which has seen it end relationships with 3,000 customers.
The bank, known officially as the Institute for Religious Works, reported a 2.9m euro (£2.3m) profit for the year, down from 86.6m euros in 2012.
Most of its losses came from the winding up of investments made before its reform programme began.
Without these, it said profit would have been 70m euros.
Pope Francis has sought to stamp out corruption and other abuses at the Vatican bank, which handles funds for the Catholic Church.
He pledged to clean up the bank following accusations of money laundering and a lack of due diligence which allowed non-religious, and even crony, businessmen to hold accounts.
Between May 2013 until June this year, outside experts combed through all the bank’s accounts in what the Vatican said was a “systematic screening of all existing customer records”.
As a result, it said it had terminated 2,600 “dormant” accounts which had seen no activity for a long time, as well as 396 customers who didn’t meet the criteria for doing business with the bank.
It said a further 359 customer accounts which didn’t meet its criteria were in the process of being terminated.
“I repeatedly said that I would proceed with zero tolerance for any suspicious activity. We have carried out our reforms in this spirit,” said the bank’s President, Ernst von Freyberg.
His statement came ahead of an announcement on Wednesday which is expected to detail further expected re-structuring at the bank

                  Vatican bank chief to step down amid restructure

By David Willey

BBC News, Rome

Pope Francis is appointing a cardinal as head of a new economic affairs department at the Vatican
The president and four non-executive members of the governing board of the Vatican bank are to step down.
French financier Jean-Baptiste de Franssu will take over as head of the bank from Ernst von Freyberg as part of a restructuring of the Catholic Church’s central government.
Pope Francis has sought to stamp out corruption and other abuses at the bank, which handles the Church’s funds.
The bank’s profits fell last year to 2.9m euros from 86.6m euros in 2012.
Ernst von Freyberg was appointed by former Pope Benedict just before his retirement in February 2013 after allegations were made that the Vatican bank had been used by money launderers,
However, attempts to create a more transparent banking system for the Catholic Church will continue under new management.
“Our ambition is to become something of a model for financial management rather than cause for occasional scandal,” the former head of the Catholic Church in Australia, Cardinal George Pell, told reporters.
He will head a new economic affairs department at the Vatican, with oversight of all the Vatican’s financial dealings and will report directly to the Pope.
The cardinal was called to Rome as a result of a year-long attempt to clean up the Vatican’s accounts.
Balance sheet woes
The Vatican’s precarious financial situation was revealed by the simultaneous publication in Rome of balance sheets for 2013 of the Holy See, of the Vatican City state, a separate entity, and of the Vatican bank, known officially as the Institute for Religious Works (IOR).
The IOR moves money around the world to finance Catholic missions and provides banking services for the Pope, clergy and religious orders.
Alongside the bank’s massive drop in profits, the Holy See, the administrative headquarters of the Church, ran up a deficit of 24.2m euros (£19.2m) last year.
However Vatican City state, the tiny sovereign enclave in the heart of Rome, which derives a large part of its income from tickets to the Vatican museums, reported a profit of 32.3m euros (£25.7m).
Vatican bank president Ernst von Freyberg says the bank’s problems have been blown out of proportion
The bank’s losses were attributed in part to writedowns of investments made before the bank’s reform programme started and when less vigilance was exercised.
The cost of bringing in American anti-money laundering experts to comb through and vet some 18,000 individual accounts at the Vatican amounted to 7.3m euros.
The Vatican bank has lost 3,000 of its customers, leaving about 15,000 current accounts still active
In an interview with the BBC in his Vatican bank office overlooking St Peter’s Square, I asked Mr von Freyberg if he had discovered many skeletons in the cupboards of the IOR during his term of office.
“Only small ones,” he replied. “There is much less to the IOR than people think. We are smaller than most small town savings and loans [banks] in the world and the same is true of our skeletons.”
“Whatever we found is much smaller than you might believe reading up about the Vatican bank in the media,” he added.
According to the IOR website, the total assets of the Vatican bank amount to 5.9 billion euros.
Under Mr von Freyberg’s management some 3,000 customer relationships have been terminated, leaving about 15,000 current accounts active.



  1. Isaac Gomes said,

    July 16, 2014 at 1:06 am

    In his Editorial “From ‘Receiving’ to ‘Giving’ Church” (The Herald July 11-17, 2014) the Editor has presented a picture of Church Finance, rather the drying up of Church Coffers! He writes “Gone are the days when financial help was given by foreign donor agencies in order to educate and empower the developing India; but the donor agencies have seen that India is no more poor and its resources are adequate to educate all the children, feed every hungry stomach of the nation, and have withdrawn their support.”

    The main reason for stoppage of donations from abroad is continued economic slowdown in Europe and the US which try to thrive on the Economics of War as Pope Francis has said so aptly. Without big wars, their arms & ammunition and warplane manufacture facilities have virtually closed down. No war, no reconstruction, no money, no donation to India!

    Another reason is the Vatican Bank Scandal. The Bank reported on 8th July 2014 a huge drop of 97 per cent in its profit in 2013 after it took €28.5 million ($38.7 million) in write-downs on investments made during 2012 and early 2013. The losses stem, in part, from a €15 million loan to a company owned by a friend of Cardinal Tarcisio Bertone, who served until last year as the Vatican’s Secretary of State. Because of this donors do not take churches on face value anymore. In case of India, they first want to see a Church which is uniformly transparent and accountable in finance and administration of its temporal goods. Unabashed loot of Church (Laity’s) money by some priests without any accountability (Fr K.K. Sebastian alias Sebastian Kuzhipala who with the full knowledge of his Provincial Thomas Ellicherail vanished from Auxilium Parish Kolkata in June 2014 without any formal handover of cash, bank and assets to the new incumbent) is a clear case in point. Foreign donors have come to know of this and therefore without a transparent system in place, donations from bona fide sources will be hard to come by. Also international banking norms and consequently Reserve Bank of India norms are changing. One of the new stipulations say that all charitable associations including Church bodies will from now on be allowed to operate only Current Accounts and no more Savings Bank Accounts.

    The editor has written “in the absence of any external help, the Church in India is going through a crucial phase of trying to make both ends meet.” Does this mean churches have closed their FCRA Bank Accounts which require them to maintain separate account book listing all overseas donations received, get it audited by a Chartered Accountant and submit it to Home Ministry every year? How is it that all on a sudden the Indian Church is finding it quite hard to “make both ends meet?” This means when the foreign donation was in full flow, it was making merry without any accountability or perspective plan. During the Laity Sunday Seminar at Seva Kendra Kolkata on 29th June 2014, one well-known Priest speaker said on the theme “Laity’s involvement in the decision making” that the Laity should be always alert and question the clergy. He narrated an anecdote where a powerful priest was handling a very big project and siphoned out good sums of money to buy a four-wheeler for his brother and also to fund house-building for a newly married relative. He came to know of this case from his priest students whom he had taught! Quoting from the Exhortations of Pope Francis he said that the Laity should be “Bold and Creative” to keep the clergy on its toes.

    Regarding being a ‘giving’ Church, the one which would take care of the needs of pastors and pastoral initiatives, first each parish priest has to come clean on all receipts and payments. Receipts would include overseas and local donations and not only “meagre Pastoral Support collection” which the Editor has written. Let the parishioners see for themselves and through Parish Finance Committee decide how to deal with shortfall / surplus (in case of rich parishes). The Parish Priest has to be very Transparent armed with Audited Accounts before he appeals to parishioners for donations. The more transparent he is, the more fervent and fruitful his appeal will be.

    The editor has stated that those who have benefited from the Church and are now well-off should support the initiatives of their respective parishes. For this also transparency in parish finance is a must. Creation of a computerized family database in each parish will generate data on parishioners’ financial health and will give a clear picture of how equipped a parish is to meet its pastoral needs. Rich parishes may set up a Corpus Fund to help poor parishes particularly in Education and Health.

    Talking of transparency in church, the President of the oldest Laity Association of Bengal is yet to settle huge cash account for last financial year, though he represents the Laity on various Commissions of Calcutta Archdiocese including the newly formed Archdiocesan Pastoral Council! With the Archbishop as Ex-Officio Chairman of the Association being fully aware of this and keeping mum, one can imagine what will happen to transparency and accountability in Indian Church with such complementary collusion!

    The Editor is playing with words by stating that “All the parishes have been urged to form Parish Finance Committees.” No such Circular from the Archbishop has been received by the parishes under Calcutta Archdiocese nor has it been published in the Herald, the official mouthpiece of Calcutta Archdiocese.

    The Editor’s remark “Building the Church is a Corporate Venture” is interesting. Corporate Venture will give the Church access to funds earmarked for Corporate Social Responsibility which has come into effect from 1st April 2014 as per the Indian Companies Act, 2013 (the “New Act”). Under this act, every company with a net worth of at least Rs 500 crore, or a minimum turnover of Rs 1,000 crore, or a minimum net profit of Rs 5 crore, is obligated to spend two per cent of its net profits for undertaking and promoting socially beneficial activities and projects in India such as promoting education, gender equality, women’s empowerment, improving maternal health, or ensuring environmental sustainability. As reported in the Economic Times dated 11 July 2014, India’s second largest IT firm Infosys said it will contribute Rs 240 crore this fiscal to its philanthropic arm, Infosys Foundation, for funding corporate social responsibility (CSR) activities. The Bangalore-based firm has already contributed USD 8 million (Rs 48 crore) in the first quarter ended June 30, 2014, to Infosys Foundation.

    So without looking out for foreign funds, the Indian Church can tap huge funds within India only provided it puts in place proper system with appropriate checks and balances. Is the clergy ready to go make a clean breast and go the extra mile to convert begging into an art?

    PS: A shortened version of the above article was given to the Herald. But it has not been published as the Editor relishes choking the voice of the Laity, with the support of the Archbishop.

    Isaac Harold Gomes


  2. July 22, 2014 at 4:07 pm

    About a decade ago, the Bangalore diocese started pairing parishes, where a poor parish would have the support of one richer. I do not know how well it has worked, but the Archbishop Bernard Moras’ initiatives has got lay organisations involved in supporting education of members of poor parishes. Spreading blessings is an old call from God (remember tithe)


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