This picture shows the headquarters of the Institute for Religious Works (IOR) the Vatican's bank on February 18, 2012 at The Vatican. erman financier Ernst von Freyberg was named the new president of the Vatican bank on February 15, ending a long vacancy after his predecessor at the secretive institution was unceremoniously sacked. AFP PHOTO / GABRIEL BOUYS (Photo credit should read GABRIEL BOUYS/AFP/Getty Images)

Profits at the Vatican bank plunged last year after thousands of accounts were closed as part of an overhaul of the scandal-ridden institution.

A total of 3,000 accounts have been closed and more than 2,000 blocked since April last year following the election of Pope Francis who has made rebuilding the tarnished image of the Vatican bank a priority.

The vast majority were small and had not been used for a long time but 750 clients, most of them Italian, with assets worth around €200m were forced to shut their accounts after probes by US financial risk group Promontory discovered that they did not have the right to bank with the Holy See.

The Vatican’s previously secret financial operations have come under pressure in recent years from international antiterrorist financing and anti-money-laundering regulators who have suspected its lack of transparency allowed it to be used as a tax haven.

The Institute for Religious Works, the official name of the bank, in a statement said that most of the funds from these closed accounts were returned to Italian institutions.

In its statutes, use of the Vatican bank – which holds €6bn in assets – should be restricted to clergy, Vatican employees and Vatican embassies and diplomats.

“This is a time of major change in the Holy See, not only for IOR,” said Cardinal George Pell, an Australian recently appointed to the powerful new position of head of economy for the world’s smallest city state.

“With the support of the Holy Father and the Council of Cardinals, we are creating simpler, more efficient structures for those serving the mission of the Catholic Church.”

Cardinal Pell is due to unveil on Wednesday a sweeping restructuring of the Vatican’s financial architecture including a dramatic shrinking of the IOR, which has been tarnished by decades of corruption and mismanagement.

Jean-Baptiste de Franssu, former head of Invesco Europe, is in pole position to be appointed the new head as Pope Francis pushes through a radical shake-up of the institution.

People close to the discussion said talks were in the closing stages with Mr de Franssu, who was European head of financial group Invesco for 15 years. He would be the first banker with an international profile to head the bank in its 127-year history.

The Vatican bank’s outgoing chairman Ernst von Freyberg, a German banker appointed by Pope Benedict in one of the last acts of his papacy who has driven the clean-up, described his work over the past year as a “painful but very necessary process that has opened the door for a new, unburdened future for the IOR”.

Net profit plunged to €2.9m from €86.6m the previous year hit by writedowns on poor investments and fluctuations in the value of its gold reserves.

Get alerts on Europe when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article