Pope Francis reforms scandal-ridden Vatican Bank in hopes of making it ‘boringly successful’
Hari Sreenivasan has the story.
HARI SREENIVASAN: Vatican officials announced today that the pope will replace top management of what’s often referred to as the Vatican Bank. It’s more formally known as the Institute for the Works of Religion and is reported to manage nearly $8 billion in assets.
It’s been plagued for years by several scandals that include charges of corruption, money laundering and mismanagement. That change was one of several announced today that impact the Vatican’s financial and property units. It came two days after Pope Francis met in Vatican City with six victims of sexual abuse by clergy. He apologized and asked for forgiveness from them during a homily and private mass.
The pope’s response to the sexual abuse scandals has been criticized by a number of victims.
John Allen covers the Vatican and global Catholicism for The Boston Globe. He joins me from Denver.
So, let’s talk a little bit about the shuffle at the bank. Why is this particular bank so significant?
JOHN ALLEN, The Boston Globe: Well, first of all, we should say that shuffle announced today concerns far more than the Vatican Bank.
The Vatican has a number of important financial centers and the reforms announced today concern all of them. But in terms of the bank, I think the most important thing is that, as you rightly indicated in the setup to our conversation, over the years, the Vatican Bank has been a recurrent source of scandal and embarrassment for the Vatican and the broader Catholic Church.
And what is the idea of the reforms that the Vatican has announced is to bring it into compliance with 21st century standards of how business ought to be done. Now, to accomplish that, the pope has done a couple of things. One is, he has significantly internationalized the leader at the bank, appointing a Frenchman as its new president, appointing a lineup for a supervisory council that is tremendously international, trying to break what has been a kind of Italian monopoly over management at the Vatican.
The other thing he has done is brought in a number of laypeople, that is nonclerics, to exercise leadership roles, not just for the bank, but for the Vatican’s other profit centers. That’s a departure with past practice, in which many of these decisions historically have been made by clergy, who may be experts in theology or church law, but quite often have no background at all in finance.
And the idea here is to, in the words of Australian Cardinal George Pell, who is the pope’s finance czar, in an interview with The Boston Globe today, the idea is to get the Vatican off the gossip pages and to make it boringly successful.
HARI SREENIVASAN: And what are some of the reasons why it is not as successful as it used to be? We have seen some of the profit margins decrease significantly.
JOHN ALLEN: Well, I mean, the profit margins went down for the fiscal year 2013 largely because the Vatican did two things.
One, it conducted an exhaustive review of all of its accounts, more than 19,000 accounts, to make sure that it had an adequate paper trail, that it knew who its clients were and where their money came from. That resulted in closing down about 3,000 of those accounts, which meant that about $60 million to $70 million of assets in the Vatican Bank left.
The other thing is, they spent about $11 million in order to hire the U.S.-based regulatory compliance group Promontory Group to conduct that review. So, their point is that these losses were exceptional. Had it not been for those two things, profits in 2013 would have been in line with previous years.
HARI SREENIVASAN: So, what are some of the scandals that make this almost called the pariah of the European banking system?
JOHN ALLEN: Well, look, we could go all the way back to the 1970s, the famous banking scandals of that era, in which there was an Italian financial institution by the name of Banco Ambrosiano that had close ties to the Vatican went belly up.
That institution was led by an Italian financier named Roberto Calvi, known as God’s banker because he was so wired in the Vatican, who ended up hanging to death under Blackfriars Bridge in London.
All of this has been the subject of a lot of potboiler novels. It figured prominently in “Godfather 3″ and so on. Now, more recently, those problems have not ended. In 2010, about $30 million in Vatican Bank assets were frozen over suspicions of suspect transactions.
There are still about three or four former officials of the Vatican Bank who are facing criminal investigations in Italy for alleged money laundering. In 2012-2013, credit card services were frozen at the Vatican because there were accusations by the Bank of Italy that the Vatican Bank wasn’t providing an adequate paper trail for those transactions, and on and on.
And all of that is precisely the sort of cleaning of the stables that I think Pope Francis and his team are attempting to accomplish.
HARI SREENIVASAN: Let’s talk also a little bit about the meeting that happened earlier this week with victims of sexual abuse.
We have seen apologies before. We have seen commitments to zero tolerance before, even by Pope Benedict. So, what is so new about this meeting?
JOHN ALLEN: Well, you’re right. Pope Benedict met with victims six times during the course of his papacy. Repeatedly, he apologized for the scandals. Repeatedly, he pledged the church to zero tolerance.
So, in effect, none of that was new about the meeting that Francis held with these six victims on Monday, although it was of course the first time he did it. But I think the novelty of this encounter was that Pope Francis publicly pledged himself to accountability, and not just accountability for clergy who abuse, but for bishops who cover it up.
And that has long been a central bone of contention from victims advocacy groups and other victims of the way the Vatican has responded to these scandals, that is that it has imposed on zero tolerance on priests who commit abuse, but basically it has not imposed any discipline on bishops who dropped the ball and failed to make zero tolerance stick.
The pope has now said, with no ifs ands or buts, that he intends that there will be accountability on his watch. And therefore I think the takeaway has to be, he set a new standard for what is going to count as his personal success or failure in leading the cleanup operation.
If people see him publicly holding bishops to account, then I think he get credit for moving the ball. If that doesn’t happen, then I think he will get a lot of blame for not living up to his own promises.
HARI SREENIVASAN: There’s been some pushback that it took the pope a long time to get this meeting on the books.
JOHN ALLEN: Well, that’s right.
What many critics will say is, why did it take 16 months for this meeting to happen? In the early stages of his papacy, Francis met with atheists and nonbelievers and the poor and so on. Now, what aides to the pope will say is that he wanted to make sure, first of all, that he was up to speed on this crisis.
Remember, the crisis as we know it in the States, massive media attention, billion-dollar lawsuits and so on, really hasn’t yet hit Argentina. And the other thing is, he wanted to have substantive progress to report. He created a commission, the Pontifical Commission for the Protection of Minors, in December.
He wanted to have some sense of its game plan before he held this meeting, so that it wouldn’t just be a photo op, but it would be a substantive conversation.
HARI SREENIVASAN: All right, John Allen of the Boston Globe joining us from Denver, thanks so much.
JOHN ALLEN: You’re welcome.
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