The Institute for Religious Works, or 'Vatican Bank', has released its annual report for 2013, announcing the start of the second phase of its intended reform.

Ernst von Freyberg, the outgoing president of the institute's board, said it will "continue to serve with prudence" and provide specialized financial services to the Church around the world.

"The valuable services that can be offered by the institute assist the Holy Father in his mission as universal pastor and also aid those institutions and individuals who collaborate with him in his ministry," von Freyberg said in the nearly 100-page report.
von Freyberg will officially leave his position at the end of July. At the moment the Institute for Religious Works, known by its Italian acronym IOR, is in transition to a new president, Jean-Baptiste de Franssu.
de Franssu's task is to lead the IOR through the reform's second phase, which will deal with the institute's integration into the Vatican's new economic-administrative framework.

The first phase of reform consisted in screening accounts and making updates to the institute's reporting standards.
As a result of the screening process, the IOR has ended around 2,600 dormant accounts and 400 customer relationship. The terminations reflect the decision to restrict customers to Catholic institutions, clerics, Vatican employees or former employees with salary and pension accounts, as well as embassies and diplomats accredited to the Holy See.
The IOR has suffered from several financial scandals and is working to increase its conformity to international standards of finance.

The annual report described a "typical customer": a religious congregation that operates in a developing country to teach children, provide health care or serve in a missionary capacity.
In order to carry out this work, the congregation "relies on funding from other parts of the world – money that goes towards building churches, new schools, digging wells, or paying the salaries of local employees, for example."
The IOR "serves the congregation by transferring these funds in a secure and cost-effective way, taking care of any necessary currency transactions, and guaranteeing compliance with anti-money laundering rules, embargo lists, and the like."

The institute has no branches abroad, and so it relies on "trusted correspondent banks around the world to transfer the funds on the customer's behalf."

"The congregation will thus hold an account at the IOR in the Vatican City State where funds are collected for transfer, kept secure and conservatively managed until the funds are required," the report stated.

The report included statements by the IOR president, the IOR cardinals' oversight commission, and the IOR's head prelate.

von Freyberg said that the IOR's 2013 operating performance was "satisfactory," though he said net profits and assets under management had been affected by "write-downs and the reform process."

In 2013 the IOR showed a net profit of some $4 million – down from more than $117 million in 2012. Reform efforts added more than $11 million to its operating expenses.

The report discussed the fluctuation in the price of gold and in the stability of bonds, indicating that these factors are among the causes of the IOR's poor net profit.

The report also disclosed the earnings of the IOR top managers. von Freyberg, for instance, earned some $282,000 for his one and a half years as president of the Board of Superintendents.

The report examined the geographical concentration of IOR investments. Its assets and liabilities have been reduced in almost every country, with the exception of Germany.

"No other countries represent more than five percent of total assets," the report reads.

The IOR's Italian assets have been almost halved, from about $1.58 billion to $925 million; the Spanish assets are down about 60 percent, from $796 million to $298 million. U.S. and Canadian assets have reduced as well.