The Vatican Bank: A Financial Institution or a Religious Entity?

If we look at formal signs, the Vatican Bank cannot be classified as a systemic institution. However, it is second to none when it comes to the degree of its influence on global financial relations, political processes in Europe, the reputation of separate persons, or even whole countries. The Vatican Bank has one important peculiarity: no institution controls its work (if we disregard the secular Council for Superintendency).

Detailed financial indicators of the Vatican Bank practically never enter the public domain. Information related to the bank’s policy of choosing customers, main operations, objects for investment, and connection with the European currency system is confidential. This means that we can only analyze the bank’s work in a limited way.

Official data:

• Net profit in 2022: EUR 29.6 million, a 63% increase as compared to 2021.
• The Vatican Bank recognizes the fact that several violations have been committed. In 2021, the financial institution’s former President, Angelo Caloia, and his lawyers, Gabriele Liuzzo and Lamberto Liuzzo, were accused of money laundering – with the total amount of damage reaching EUR 17 million.
• The assets of the Vatican Bank amount to EUR 5.2 billion as of the end of 2022.
• The number of customers equals about 12,700.
• In 2022, the institution allocated EUR 1.14 million to charity.
• The dividends distributed in 2022 reach USD 5.5 million.
• The latest audit of the Vatican Bank was carried out before publishing the official reports (the company that carried it out was called Mazars); however, its results were first submitted for consideration to the Commission of Cardinals.

The Bank That Does Not Exist

Nobody officially admits to creating a financial institution to meet the needs of the Vatican customers (representatives of the Catholic religion in general). Quite a number of people are confused because there is a very fine line between the Vatican as a religious center and the Vatican as a secular formation.

The Vatican (also referred to as the Vatican city-state) is actually an enclave—a limited territory located in Rome. The Lateran Agreements of 1929 are the legal grounds for the existence of the world Catholic center. Under their provisions, the Vatican can have its own laws, policy, and judicial bodies. However, all these institutions are controlled and managed by the Holy See.

This entity is treated as a subject of international law. The Holy See is a permanent representative of the United Nations Organization, issues its own diplomatic documents, and conducts foreign relations on behalf of the Catholic Church. Therefore, formally speaking, it isn’t correct to say that the Vatican Bank exists. Such a structure does exist, however, in practice.

The Vatican has a functioning autonomous financial body. Formally, its name is the Institute for Works of Religion (Italian: Istituto per le Opere di Religione). This is the institution that most people often mean when they mention the “Vatican Bank,” which is commonly abbreviated to IOR.

IOR’s main functions:

• Work with deposits and accounts of religious Catholic orders across the globe.
• Financial and banking services are provided to individuals who have lived or worked in the Vatican for a long period of time.
• Granting loans and credits to the structures of the Roman Curia (this is a frequent reason why the Vatican Bank is accused of financial violations).

The IOR’s management structure is not publicly disclosed, even though it complies with all the formal requirements that any Italian financial institution must meet. The current president of the Vatican Bank, Jean-Baptiste de Franssu, was appointed in 2014. The bank’s CEO is Gian Franco Mammi.

The bank is technically managed by a commission of cardinals, while the lay Council of Superintendents exercises all controlling functions. Curiously, the Secretary of State has been excluded from the list of individuals who could supervise IOR’s work since 2020. As for all standard financial reports, the Vatican Bank began publishing them in 2013.

Peculiarities of IOR’s work:

• Its accounts are not subject to taxation and the financial (banking) regulations that exist in other countries.
• The Vatican Bank is officially considered a commercial entity, so it is controlled by ASIF (Autorità di Supervisione e Informazione Finanziaria), the supervisory body within the Holy See that is responsible for combating money laundering and terrorist financing.
• Since 2012, IOR’s operations have been reviewed (but not controlled) by Moneyval, which is the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures.
• The Vatican Bank has made several attempts to reform its work since 2014. The results were unexpected: hundreds of accounts were closed or frozen, and formal charges were brought against some former bank officials.

IOR is not the only institution that manages and controls the property and assets of the Catholic church, though. Here are some other supplementary structures that have similar responsibilities: 

• Administration of the Patrimony of the Apostolic See (APSA) is an organization that manages real estate and assets that belong to the Holy See.
• The Secretariat of State deals with overseeing political and administrative affairs, including financial matters.
• Peter’s Pence is a fund that supports the activities of the Holy See and aids those in need.
• The Secretariat for the Economy is an institution that coordinates financial operations and ensures transparency in financial reporting.

These structures represent only the visible part of the iceberg. For centuries, the Catholic Church has kept its financial affairs confidential, hiding all its secrets from outsiders.

Conclusion

The Vatican Bank and its financial entities are at the heart of looking after the fortunes of the Catholic Church, but nobody inside or outside of the church really knows what is going on. While some transparency efforts have been undertaken in the past few years, most of its operation is opaque to public view, locked behind a curtain of confidentiality, and embedded in byzantine internal governance arrangements. These financial institutions exert notable influence — and not just when it comes to religious matters, but also internationally: on global politics, economics, and the reputations of foreign heads of state. But what precisely their power is, again, remains a mystery.