Seeking transparency, Vatican Bank issues first annual report

The Institute for Religious Works or the Vatican Bank as it is commonly known June 28 2013 File Photo CNA CNA Catholic News 6 28 13 The Institute for Religious Works, or the Vatican Bank as it is commonly known, June 28, 2013 (File Photo/CNA).

The Vatican Bank confirmed a commitment to full financial transparency Oct. 1 by publishing its first Annual Report.

With the report's publication, the Vatican Bank – known officially as the Institute for the Works of Religion – fulfills a promise made in May by its president, Ernst Von Freyberg. The bank receives and administers funds for charitable activities, especially in the developing world.

At that time, Pope Francis had yet to appoint a Pontifical Commission to advise him on the bank, headed by Cardinal Raffaele Farina, former librarian of the Vatican Library and archivist of the Vatican Secret Archives.

The report's publication comes as the Vatican Bank's future has yet to be decided. Pope Francis has indicated a willingness to consider a reform of the institution, hoping to harmonize it with the Church's universal mission.

The Annual Report consists of a review of operations in 2012; information on corporate governance and legal framework; an operational outlook for 2013; and audited financial statements for 2012, together with 2011 data for comparison. The financial statements were compiled according to International Financial Reporting Standards.

The organization's press release indicates that it made a net profit of more than $117.1 million, significantly up from its 2011 net profits of $27.5 million. 

This increase allowed the Vatican Bank to contribute $74 million to the Holy See's budget, while transferring $43.1 to the "general operating risk reserve," or retained earnings.

The report shows that in 2012, the Vatican Bank was entrusted with $8.5 billion in customers' assets, consisting of $3.1 billion in deposits; $4.3 billion managed by the bank under asset management agreements; and $1.1 billion in assets held for customers under custody agreements.

According to the report, at the end of 2012 the Vatican Bank had approximately 18,900 customers, and 85 percent of the institution's global "wealth" consists in the assets deposited by about 5,200 Catholic institutions.

The Vatican Bank has drawn praise for its efforts to increase transparency, although one bank analyst suggested that the new report is "confusing" from a technical standpoint.

After an attentive reading of the report, Romeo Ciminello, scientific director of the Italian society 4metx Onlus, noticed some seeming incongruities within the report, explaining to CNA that it initially "seems there are $9.2 million of net profits missing," and "the difference comes out" from the data published on page 13 of the report.

Ciminello calculated the difference between profits and expenses, and the result is $107.93 million. But, he notes, "the net profits amounted to $117.1 million," so there would seem to be $9.2 million missing.

Only on page 29 of the report, Ciminello concludes, "we can find out that the missing dollars come out by the data of the other net income ($6.171 million) and impairment losses ($2.846 million)," whose total amount is $9.2 million.

Other groups applauded the effort as a step towards greater openness and fighting corruption. Von Freyberg stated that "with the publication of our Annual Report, we are meeting our commitment to provide the transparency about our activities which the Catholic Church, our customers, the Vatican authorities, our correspondent banks and the public rightfully expect."

And in July 2012, Europe's anti-money-laundering agency Moneyval found the Vatican "compliant" or "largely compliant" on nine of the 16 "key and core" areas for combating terrorist financing and money-laundering.

The Moneyval report indicated that the Vatican Bank's security standards surpass those required by Vatican law and that Vatican legislation on secrecy is compliant with international standards. The report also praised the high level of Vatican engagement in international cooperation.

"The Holy See has come a long way in a very short period of time and many of the building blocks of anti-money laundering and combating the financing of terrorism regimes are now formally in place," the Moneyval report said.

More in Vatican

At the moment, the Vatican Bank is engaged in a screening of its accounts undertaken by the American firm Promontory Financial Group.

The prominent Italian newspaper Corriere della Sera reported Oct. 1 that the Vatican Bank decided to close 900 accounts the previous day. Among these were the accounts held by the embassies of Iran, Indonesia and Iraq, because they did not fulfill the requirements for transparency requested by Promontory.

Corriere della Sera also reported that the bank may close the accounts of all foreign embassies accredited to the Holy See, but the Vatican Bank neither confirmed nor denied this move.

A Vatican Bank spokesperson told CNA Oct. 1 that "in principle, the Vatican Bank does not comment on customer relationships. On a more general note we can confirm that the remediation effort with regard to the accounts held at the Vatican Bank is proceeding according to plan."

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