God's Bank and the Next Pope

By Tim Marshall
Sky News
February 15, 2013

http://news.sky.com/story/1052615/gods-bank-and-the-next-pope

The next pope will not only have to lead the world's Roman Catholics but needs to be good with finances as the Vatican needs cash.

The Pope holding an audience in the Vatican on Ash Wednesday

Whoever takes over from Pope Benedict next month has an almighty financial mess to clear up.

Most coverage of the Pope's achievements, or lack of, centred on matters of faith and doctrine. He came out with a mixed score partially dependant on judgement of those slippery concepts. If you measure the success of his tenure in a financial way, the balance sheet is more negative.

The Vatican is a state and a business as well as a religious organisation. The state has investments, GDP, and a bank with 33,400 accounts. If you were generous you might describe its accounting system as opaque. The European Parliament has called for it to be more transparent.

Four years after he came to power, Benedict XVI, the de facto CEO of the Vatican, reacted to a string of accusations of financial irregularity by its bank, the Institute for Works of Religion (IOR). He created a supervisory body - the Financial Information Authority.

The Vatican is a state, a business and a religious organisation

It passed legislation to ensure the bank meets international standards on countering money laundering and the financing of terror.

Two years later, the anti-money laundering watchdog Moneyval, part of the Council of Europe, issued a report saying the Vatican was falling well short of its goals. It could not recommend that it be included on the list of 'white states' which are considered to be upholding acceptable standards of banking transparency, including in the areas of money laundering, tax evasion, and the financing of terror.

Following this was the scandal of the Pope's 'butler', Paolo Gabriele, who allegedly leaked documents showing potentially criminal activity in business dealings with Italian companies. It was alleged that cash had gone missing, and certain companies were offered contracts above their worth.

Today came news that the Vatican bank has appointed a new director, German lawyer Ernst von Freyberg. The IOR had been under interim leadership since the previous director was fired last May for alleged mismanagement. The 54-year-old is an experienced financial expert as well as being a member of the Catholic Order of the Knights of Malta.

The Vatican's bank is thought to have assets of $4bn (?2.6bn), but the overall worth of the Vatican State is far higher.

Like any business, the Roman Catholic Church requires cash flow and its weekly take is thought to have been seriously hit by a sharp fall in the amount of money coming in from the collection plates each Sunday. The series of sex scandals involving young boys, especially in Ireland, Germany, and the USA has been reflected in falling attendances.

There appears to be a power struggle within the highest echelons of the Vatican about how it conducts its financial affairs. There is one wing which hopes to modernise its practises and make the IOR less opaque, but the old guard insists that, just as the Vatican policed itself on the sex scandals, in some cases blocking police investigations, so it also has the right to regulate itself in the financial world.

The biblical injunction "Render to Caesar the things that are Caesar's, and to God the things that are God's" is about the relationship between religious and secular authority.

It remains contentious.