Pope Francis has moved decisively to clean up corruption in Vatican finances and to avoid a repeat of the high-profile botched investment in a London property that resulted in a loss of 140 million euros.
The Holy Father issued a document called a “rescriptum”, which explicitly ordered all investments made by Vatican departments to proceed through the Institute of Works of Religion (IOR), also known as the Vatican bank.
The order gives all Vatican departments until October 1 to close their investment accounts or stock holdings in foreign banks, including those in Italy, and to transfer them to the IOR.
Crucially, the move centralises investments by the Vatican in an institution which is subject to international standards and inspections by financial watchdogs.
It is the culmination of a policy first mooted during the period when Cardinal George Pell was in charge of reforming Vatican finances.
The policy was implemented incrementally in the last few years and then definitively with the promulgation of Praedicate Evangelium in March.
The botched deal for a share in 60 Sloane Avenue, a building in Knightsbridge, was extremely damaging to the finances of the Vatican when it emerged the enormous losses were compensated by money derived from “Peter’s Pence”, which funds the papal charities.
The scandal, which is at the heart of a criminal corruption case, has been blamed for a 40 per cent slump in donations to Peter’s Pence between 2015 and 2020, and the effects of the global Covid pandemic has also adversely effected Vatican income.
The centralisation policy strips all Vatican departments of the ability to invest their funds independently. Excluding property, Vatican investments are estimated to be in the region of two billion euros.
Besides the need to avoid a repeat of a scandal on such a scale, the shortfall in donations may also suggest the necessity for greater liquidity in the management of Vatican assets.
As part of ongoing reforms, the Vatican in July also enforced a new policy on investments to ensure they are ethical, green, low-risk, and avoid arms manufacture or health, science or pharmaceutical sectors involved in abortion, contraception or embryonic stem cells.
The reforms move policy for Vatican finances away from predominantly Italian finance managers, who were not always “the Blessed Imelda”, according to Pope Francis in a poke at their occasional lack of honesty and innocence, to a Vatican committee, which includes Irish American Cardinal Kevin Farrell among its members.
Observers have noted, however, that the rescriptum not only reminds Vatican departments to work through the IOR but also goes further than Praedicate Evangelium by effectively sidelining the function of a department called the Administration of the Patrimony of the Holy See (APSA).
The new document transfers management of all assets and investments away from APSA with the exception of the Vatican’s property portfolio, leaving the organisation effectively as nothing more than a client of the IOR.
It also removes responsibility for Vatican investments from the Secretary of State and the Secretariat for the Economy by making the IOR the exclusively competent authority.
The move represents a U-turn of policy in the space of just five months because Praedicate Evangelium explicitly stated that APSA “is the entity responsible for the administration and management of the real estate and movable assets of the Holy See” and “is also responsible for administering the real estate and movable assets of those entities that have entrusted their assets to the Holy See”.
It may be significant that the IOR, a commercial bank, is the one financial institution at the Vatican which is regulated by ASIF, the internal financial watchdog of the Holy See, and is subject to scrutiny by Moneyval, the anti-laundering inspectorate of the Council of Europe, which has recently praised its efforts combat corruption.
Areas of Catholic Herald business are still recovering post-pandemic.
However, we are reaching out to the Catholic community and readership, that has been so loyal to the Catholic Herald. Please join us on our 135 year mission by supporting us.
We are raising £250,000 to safeguard the Herald as a world-leading voice in Catholic journalism and teaching.
We have been a bold and influential voice in the church since 1888, standing up for traditional Catholic culture and values. Please consider donating.