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.