Just don’t call it the Vatican Bank: A guide to the financial institutions of the Holy See

A Pillar Explainer

As Vatican financial authorities continue their sprawling investigation into the affairs of the Secretariat of State, it can be hard to keep all the different institutional players straight. 

To help you cut through the acronyms and nicknames, The Pillar is compiling a series of explainers to help you make sense of the details. 

In this second installment, we bring you the what’s what of Vatican financial institutions. Who are the banks in Pope Francis’ neighborhood?

What does “the Vatican” even mean?

Many people think of the Holy See, or the Vatican, or Vatican City, as one thing. The reality is more complicated and messy. 

The Holy See is the sovereign entity in international law. It effectively consists of the pope and his government of the universal Church, and has long been recognized in international law as a  guarantee of the independence of the pope, and the operations of the Church, from interference by any national government. 

Vatican City or the Vatican City State is the territory within the city of Rome which is recognized as an independent city state under the Lateran Treaty between the Holy See and Italy. Vatican City has its own laws, police, and courts, but it is wholly governed under the authority of the Holy See.

(The word Vatican itself refers to the Roman hill on which Vatican City sits, and is a term that predates Christianity itself.) 

The distinction between the Holy See and Vatican City is often missed, but it matters: ambassadors, diplomatic passports, even the permanent observer at the United Nations, are all accredited to the Holy See, not the piece of land it governs. Even if Vatican City ceased to exist, the Holy See would still be a sovereign entity under international law, doing all the things it does now on the diplomatic landscape.

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What is the Vatican Bank?

Reading stories about Vatican finances, you will often come across references to the so-called Vatican Bank. But there is no institution with this name. 

The phrase is usually used in reference to the Istituto per le Opere di Religione (in English, The Institute for Works of Religion)

Among people familiar with these things (that now includes you) the bank is known by its initials, IOR - pronounced Eeyore, if you’re in Rome. 

While the IOR isn’t the Vatican bank, it is a bank in Vatican City. It operates like most commercial banks. Among its functions, it:

  • Takes deposits and holds accounts for, as its name suggests, religious orders and institutions around the world. 

  • Offers accounts for individuals living or working in Vatican City.

The IOR is run by a president and director, usually laymen with professional expertise in banking. The current president is Jean-Baptiste de Franssu, who was appointed in 2014. 

The bank is governed by a commission of cardinals, appointed by the pope, and overseen by a lay Board of Superintendence. Although this commission has traditionally included the Secretary of State, since last year the secretary has been excluded from the bank’s management and oversight.

Since 2013, the IOR has published an annual financial report.

Because the IOR is in Vatican City, its accounts are not subject to taxation and other regulations imposed by other countries, making it a target for abuse by money launderers.

And because the bank is a commercial institution, it falls under the oversight of the AIF (see below), and since 2012 has been inspected regularly by Moneyval, the Council of Europe’s anti-money laundering watchdog. 

The IOR has been at the centre of several financial scandals in its history, most notably the Banco Ambrosiano scandal of the 1980s. Since 2014, the IOR has been the subject of several financial reforming efforts, with hundreds of accounts closed and charges filed against former officials at the bank.

In January, the former president of the IOR became the first person to be handed a jail sentence by a Vatican City court for financial crimes.

Of course, the IOR is not the only important financial institution in the Vatican.

The Administration of the Patrimony of the Apostolic See’s primary function is to manage the Holy See’s real estate portfolio and other assets and investments - including cash and stocks - generating a return to help fund the operations of the Roman curia. In this way, it acts as a kind of sovereign wealth manager for the Holy See. 

APSA, as it’s known, also processes budgeting and payroll for most curial departments.

APSA also manages assets and accounts belonging to other departments of the curia - while this has traditionally been a service it could perform when other Vatican departments requested it, in 2020, Pope Francis ordered all dicasteries to move their assets and accounts to APSA. This was done to centralize accounting and oversight, and to ease the Holy See’s liquidity crisis.

In the past, APSA provided commercial banking services and accounts to select individuals, like cardinals and members of the papal household. 

The use of those accounts has been linked to allegations of money laundering and other financial crimes. 

Ending APSA individual accounts and commercial services was a key priority of financial reforms under Cardinal George Pell, who was appointed by Pope Francis as the first prefect of the Secretariat for the Economy (see below) in 2014.

In 2015, the Vatican’s own financial watchdog, the AIF, concluded that APSA was no longer an “entity that carries out financial activities on a professional basis,” and so “APSA stopped being a part of AIF’s jurisdiction at the end of 2015” — meaning that APSA was exempted from future AIF and Moneyval inspections. 

Despite this, it has been reported that:

  • The loan went to a foundation co-owned by the Secretariat of State to finance the purchase of the IDI hospital, which had collapsed under 800 million euros of debt related to money laundering, embezzlement, and fraud charges.

  • When the grant stalled and the loan was not repaid, APSA had to write off 30 million euros in bad debt, wiping out its profits for 2018.

As of the end of 2020, APSA is now responsible for managing all institutional finances, assets, and investments for the Holy See. Monitoring of its own financial affairs falls under the Secretariat for the Economy (see below).

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The Secretariat of State

Under canon law, the pope is “the supreme administrator and steward of all ecclesiastical goods.” However, within the structure of the Holy See, different curial departments have their own assets, budgets, and expenses. 

The Secretariat of State, in charge of the Holy See’s diplomatic missions and the governance of the Vatican City State, has traditionally managed so much money, both in terms of cash and through its asset portfolio, that it had the nickname “the third Vatican bank,” coming after the IOR and APSA.

In addition to its own proper funds, the secretariat has also had management of Peter’s Pence, the fund supported by donations from Catholics and dioceses across the world to support the work of the pope. The secretariat has also held custody of the pope’s private discretionary bank account.

Overall responsibility for the department’s financial affairs lies with the Secretary of State, Cardinal Parolin. But day-to-day management of finances is conducted through the Administrative Office of the secretariat’s First Section. The First Section is led by the sostituto for general affairs, who also functions as a de facto papal chief of staff for curial business. 

The present set of overlapping Vatican financial scandals mostly concern the business conduct of the Secretariat of State. They include:

Many of these scandals involve Cardinal Angelo Becciu, who served as sostituto at the Secretariat of State from 2011 until 2018. 

In September, 2020, Pope Francis forced Cardinal Becciu to resign his position as prefect of the Congregation for the Causes of Saints, and his rights and privileges as a cardinal. The pope took this action after reportedly being presented by Vatican prosecutors with a dossier of information concerning Becciu’s role in curial finances.

In December 2020, the pope stripped the Secretariat of State of its financial portfolio, and ordered the department to turn over control of all bank accounts and investments to APSA. The law issued by the pope bringing in this change contained specific mention of several financial practices linked to recent scandals. 

The Secretariat of State was also ordered to submit its annual budget and expenses to the Secretariat for the Economy (see below).

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ASIF, the organization formerly known as AIF 

The Financial Information Authority (AIF) was created by Pope Benedict XVI in 2010 to monitor financial transactions in the Vatican and specifically to work to identify and eradicate money laundering activities in institutions like IOR and APSA.

In December 2020, Pope Francis expanded the AIF’s powers and responsibility, changing its name to the Financial Supervisory and Information Authority (ASIF), often pronounced “As-If” - no smirking from the peanut gallery, please.

Among other changes made to the department, the pope created a new Regulation and Legal Affairs Unit.

ASIF  is a member of the Egmont Group, a network of national anti-money laundering and financial intelligence agencies. 

In October 2019, AIF was caught up in the current series of financial scandals when Vatican police raided its offices, leading to the suspension of Tomasso di Ruzza, the AIF’s director. 

The raid also led to the suspension of the AIF from Egmont, and the resignation of René Brülhart, the AIF’s widely respected president, in November of the same year. Egmont said the suspension was due in part to the possible compromise of sensitive intelligence by the raid.

Although Carmelo Barbagallo was named to replace Brülhart, two members of the AIF board also resigned in November 2019. One of them, Marc Odendall, said the AIF had become an “empty shell” and that there was “no point” to continuing to work with it. 

Egmont lifted ASIF’s suspension in January 2020, and a new director was appointed in April.

The Secretariat for the Economy

The Secretariat for the Economy was created by Pope Francis in 2014 as part of his effort to bring order and transparency to curial finances, after years of scandal during the reign of Pope Benedict XVI. 

Francis appointed Cardinal George Pell as the first prefect of the new department, granting him broad-reaching authority over Vatican finances. 

Pell’s initial reform agenda included the centralization of all curial assets at APSA, and ordering an external audit of all Vatican departments. Both of these measures were, according to several officials at the secretariat, vigorously opposed by the Secretariat of State, and especially by Cardinal Angelo Becciu. 

In 2016, Becciu announced the cancellation of the external audit, even while he did not have the legal authority to cancel the audit. He is also alleged to have used prohibited accounting practices to shield the Secretariat of State’s assets, investments, and debts from the scrutiny of the Secretariat for the Economy.

In 2017, Cardinal Pell took a leave of absence from the Secretariat for the Economy to return to Australia to contest charges of sexual abuse. Pell was eventually exonerated by the Australian High Court.

Also in 2017, the first Auditor General of the Vatican, Libero Milone was forced to resign by Cardinal Becciu. Becciu accused Milone of “spying” on the private financial affairs of senior curial officials, including Becciu’s, and threatened him with criminal prosecution if he did not resign. 

Milone said he was forced to resign because he had uncovered evidence of financial corruption by senior curial officials, as well as efforts to spy on his office’s work.

In November, 2019, after months of concerted reporting on the financial scandals at the Secretariat of State, Pope Francis named Fr. Juan Antonio Guerrero Alves, SJ, as the new prefect of the Secretariat of the Economy and passed numerous new directives and laws to bring into force Pell’s original reforming agenda.

Last month, Cardinal Pell praised the decision by Pope Francis to strip the Secretariat of State of control of its assets and investments and turn them over to APSA, under the oversight of the Secretariat for the Economy. Pell called the move “massive progress.”

Pell told an online event in January that, had the measures been taken years earlier, as he had previously attempted, “a good deal of the present troubles, especially the London troubles...they might not have been prevented, but they certainly would have been recognized earlier.”