VATICAN CITY
Boston Globe
By Jacob Soll / June 8, 2013
AS POPE FRANCIS sets the course for his young papacy, one of his first challenges has nothing to do with theology or the behavior of the far-flung priests and bishops he supervises: It is to reform the troubled Vatican Bank. A private and highly secretive institution estimated to control more than $7 billion in capital and more than 33,000 secret accounts, the Institute for the Works of Religion (its official name) has long been dogged by scandals and questions.
Founded in 1942 to “safeguard and administer” the funds of church members, it has become a modern symbol of the hazards of secrecy in finance. It was accused of holding Croatian Nazi funds during World War II and more recently has faced continued suspicions of money laundering for the mafia.
Publicly, at least, the bank is making efforts to push back against this reputation. Ernst von Freyberg, who became the bank’s chief in February, has characterized it as “very, very safe,” and pledged to clean up the scandal-racked institution. He has retained an American law firm to help the bank meet international anti-money-laundering and terrorism finance standards.
But if history is any guide, Francis and von Freyberg face a difficult task. Effectively, the pope is the last absolute monarch in Europe, a single individual with total authority over the city-state’s government—and this extends to its banking arm, which he personally oversees with the help of two boards of advisers. The Vatican is essentially trying to run a modern bank within a monarchy. No matter how sincere reformers of the Vatican Bank are, they are up against an age-old problem: The long history of European banking suggests that secretive, absolute government and long-term successful banking do not coexist well.
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