Vatican bank profits rise as clean up continues

Irish Times
May 25, 2015

http://www.irishtimes.com/business/financial-services/vatican-bank-profits-rise-as-clean-up-continues-1.2225161

Pope Francis sprinkles holy water during a Mass of Pentecost at Saint Peter’s Basilica at the Vatican. The Vatican bank posted a sharp rise in net profit in 2014

The Vatican bank posted a sharp rise in net profit in 2014 after absorbing the costs of a clean up that hit earnings the year before as part of a wide-ranging drive to tighten financial governance and eliminate abuse, a statement showed on Monday.

The bank, formally known as the Institute for Religious Works (IOR), has toughened regulatory standards and closed thousands of accounts, which were either inactive or deemed not to meet new standards required of clients.

Reforming the IOR has been one of the most sensitive issues facing Pope Francis as he seeks to overhaul the complex Vatican administration after years of scandal, ranging from allegations of financial malpractice to coverups of child sexual abuse by priests.

After 2013 results that were hit by heavy write downs on investments and a jump in operating costs to meet new anti-money laundering standards, net profit last year rebounded to €69.3 million from €2.9 million the year before.

The bank has also promised to focus more closely on improving returns for its customers, which include religious orders and charities as well as Church offices, following several years in which management attention has been mainly focused on improving its governance.

Reacting to the environment of ultra-low interest rates in Europe, it is trying to shift clients away from simple term deposits and strengthen management of its €6 billion in customer assets.

“The main focus is on fundamentally improving our overall client service standards and further professionalising our asset management services,” IOR chairman Jean-Baptiste de Franssu said in a statement.

The IOR statement said the bank was continuing work to meet tighter oversight standards that have been introduced over recent years.

In a break from the past, Pope Francis has appointed an outsider, Australian cardinal George Pell, to run an overhaul of the opaque finances of the Holy See, which for years were controlled by a narrow group of Italian officials.

Wide-ranging changes have been introduced, ranging from improved compliance standards to a crackdown on money-laundering, which pointed to suspicions that IOR accounts were being abused to help some clients or even Vatican outsiders avoid tax.

Since May 2013, a total of 4,614 accounts have been closed, most of which were dormant. However 554 were terminated because they were judged not to meet the criteria required of clients to hold an account at the bank. A further 274 accounts are in the process of being closed.