It has indeed been a long time since the Stato della Città del Vaticano, otherwise known as the Vatican City State, enjoyed the kind of political power that it did during its heyday, when the inquisition all but destroyed the multicultural fabric of Europe. Despite its weakness relative to the rise of civil societies over the last few centuries, however, it is still holding its own as a state, with its own police force/intelligence service, its own citizenship (currently somewhere just shy of 1,000) that is distinct from that of the country in which it is located, and, of course, its own bank.
Until recently, however, one may not have known that the world-headquarters of Catholicism had its own bank. But this is perhaps understandable, given that, until recently, the Vatican’s bank used to bear the curious title of “The Institute for Works of Religion.”
Officially, the bank formerly known as the IOR is a 126-year-old institution, but in all of its time, it has never had to behave much like its peers in the financial sector, particularly when it comes to things like opening up its balance sheet, and reporting income on a quarterly basis.
Basically, None of this Would Have Happened Absent Scandal and Outrage
The decision on the part of the Vatican to open up its books is officially the result of an agreement it made this past July with Italian authorities, who were ostensibly concerned about the bank being used for the purpose of laundering, maybe to terrorists. However, at least a few decades of increasingly high-profile “incidents,” perhaps the least morally offensive of which involve old-fashioned financial malfeasance, have certainly prepared the ground for the increased confidence of government authorities in their dealings with the Holy See.
Indeed, after a long period during which it appeared as though the IOR was immune from being placed under any restrictions by Italian and European authorities, on Oct 15 Cardinal Tarcisio Bertone, the Vatican’s Secretary of State and second-most important official, stepped down from his powerful position under pressure for his powerlessness to do anything about some of the worst of the Vatican and the IOR’s activities.
One of the most famous scandals that may not be as well known in the US dates back 30 years, with the bankruptcy of the Milan-based Banco Ambrosiano. The Vatican was the bank’s largest shareholder, and while there is a whole hornet’s nest of conspiracy theories surrounding the relationship between the two, what is known is that Ambrosiano was being used by its members, all with close personal ties to the highest levels of the Catholic Church, to funnel money from to Italian political parties, as well as brutal dictatorships and counter-revolutionary movements in South America such as the Nicaraguan Contras. Banco Ambrosiano was also close to the Mafia and laundered money for it.
More recently, however, an investigation of two of the bank’s top officials for improper compliance with money laundering regulation was initiated in 2010, and is ongoing at present. This past June, Italian investigators arrested one of the bank’s accountants, as well as a broker and a member of the secret service after the laundering investigation led them to a plot to smuggle over $20 million from an account in Switzerland into Italy.
So, How Did the Bank Do?
The numbers released by the bank, in a rather lengthy report the press-release for which can be found in English here, were for the the full-year of 2012. IOR netter $117 million, four time as much as it had earned the prior year. About half of this amount was given to the Papacy for the divinely mandated task of carrying out charitable works, and its pension system is responsible for than $8 billion in client assets.
The IOR also had some $56 million in gold and other precious metals, owned a real-estate company, and gave out about $35 million in loans last year alone. These number may be laughable by the standards of, say, a JPMorgan (JPM) , or a Goldman Sachs (GS) , but this is the Vatican after all, and they paint a picture of the vast monetary resources that are at the Church’s disposal, as well as the fiscal acumen that required to keep the money flowing.
The question of what comes next for the IOR is incredibly open-ended, as the same question is currently looming heavily over the entire Roman Catholic Church. The ascent of Pope Francis is being seen by many as an incredibly hopeful sign, one that has already yielded highly publicised statements about the pernicious role of profit-driven finance culture, and the need to refocus the Church's efforts on people, rather than social issues such as sexual orientation and contraceptives. Pope Francis has also seemed more willing than any predecessor to leave some of his more unscrupulous officials at the mercy of the lay-authorities, so there really is not telling what might shake out of all of this.
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