Vatican Revamps Its Banks Ranks In Push for Transparency, Holy See Names New CEO and Management Board, by Stacy Meichtry, Wall Street Journal, September 25, 2009

Vatican Revamps Its Bank's Ranks
In Push for Transparency, Holy See Names New CEO and Management Board

By Stacy Meichtry
Wall Street Journal
September 25, 2009

http://online.wsj.com/article/SB125373769718835097.html

VATICAN CITY — The Holy See announced a sweeping overhaul of the Vatican bank's management as part of Pope Benedict XVI's push for greater transparency at one of the world's most secretive financial institutions.

In a statement Wednesday, the Holy See said it had appointed Ettore Gotti Tedeschi, who headed an Italian unit of Banco Santander SA, as the new head of the Vatican bank, which is called the Istituto per le Opere di Religione, or IOR. The Holy See also replaced the IOR's management board.

The appointment marks the end of Angelo Caloia's two decades at the helm of the IOR — a run that made him one of the Vatican's most powerful and deeply entrenched officials. Mr. Caloia, an Italian banker and economist, was the first noncleric to run the IOR. Mr. Caloia, through his secretary, declined to comment.

The Vatican named a new chief of its bank, in a push by the pope, shown in June in St. Peter's square, to improve transparency.
Photo by AFP

The Vatican statement didn't give a reason for the changes. Senior Vatican officials, however, said Cardinal Tarcisio Bertone, the Vatican's No. 2 official, has long sought to shake up the bank's management in a bid to modernize its operations.

Any push for change is likely to run up against the Vatican's long tradition of maintaining a low profile when it comes to managing Church finances. "It's a delicate post. We expect deep change," said one Vatican official.

Mr. Gotti Tedeschi's appointment, one Vatican official said, shows the bank is "moving in the direction of more transparency, but it's hard to predict what concrete changes will be made."

The IOR doesn't administer loans or publish its financial results. Its clients are mainly Vatican officials, clergy and private individuals who are invited by the bank to open accounts. Located in a medieval tower inside the world's smallest state, the IOR is regulated only by a small commission of cardinals who report to the pope.

Over the decades, the IOR's lack of transparency and oversight has led to abusive practices. Mr. Caloia was appointed under Pope John Paul II in 1989 to clean up the IOR in the wake of a massive banking scandal.

In the late 1980s, Italian magistrates investigated the IOR for contributing to the 1982 collapse of Banco Ambrosiano. The Vatican, which was a shareholder in the bank, repeatedly denied wrongdoing and invoked a treaty with Italy that shields the Vatican from Italian investigations under its status as an independent sovereign state. The Vatican, denying any wrongdoing, eventually agreed to pay $250 million to Banco Abrosiano's creditors.

Mr. Gotti Tedeschi, according to two people familiar with the matter, served as an influential adviser on "Caritas in Veritate," Pope Benedict's recent treatise on the global economy. That document, one of the most authoritative forms of papal writing known as an "encyclical," called for stronger ethics and greater regulatory oversight in the financial world.

In his new post, Mr. Gotti Tedeschi will lead the IOR's "management board," a body of laymen who oversee the bank's operations. The Holy See also named new members to the supervisory board, including Carl Anderson, chief executive of the Knights of Columbus, a Catholic group based in New Haven, Conn., and a member of several Vatican advisory bodies.

Write to Stacy Meichtry at stacy.meichtry@wsj.com