bank clean-up and account closures wipe out profit
Send a link to a friend
[July 08, 2014] By
VATICAN CITY (Reuters) -
The Vatican bank has blocked the accounts of more than
2,000 clients and ended some 3,000 "customer
relationships" as part of a clean-up process that nearly
wiped out its profit, its 2013 financial statement
showed on Tuesday.
The bank has been hit by years of scandal, including money
laundering allegations and is about to be restructured with a new
president and a new board.
All but about 400 of the 3,000 terminated accounts were "dormant"
with small balances and had been inactive for years.
A further 359 customer relationships are due to be terminated after
staff and outside experts found they did not meet the criteria for
holding accounts at the bank, which has about 15,500 customers, some
with more than one account.
The stated purpose of the bank - formally known as the Institute for
Works of Religion (IOR) - is to manage money for the Church,
religious orders, charities and Vatican employees.
The statement showed that the ongoing clean-up process, started by
its President Ernst von Freyberg after his arrival last year, has
come with a heavy financial price, particularly for ridding the IOR
of some dubious investments.
Profits in 2013 plummeted to 2.9 million euros ($4 million)from 86.6
million euros in 2012 as the IOR took huge write-downs to wind up
investments made before the bank's reform program started and when
there was less vigilance.
Last year's profits were also hit by extraordinary expenses related
to the hiring of external professionals, such as the Promontory
Financial Group, to help in compliance and transparency issues and
The statement said 2013 profit would have been about 70 million
euros without the write-downs and the one-off expenses.
The Vatican has been saying for months that the 2013 figures would
be bad. Freyberg said in a statement he had "proceeded with zero
tolerance for any suspicious activity", and that the "painful but
very necessary process has opened the door for a new, unburdened
future of the IOR".
[to top of second column]
The closing of accounts and the reform process in general resulted
in an outflow of about 400 million euros, which the statement said
had been done in a way to "ensure traceability". Most of the money -
88 percent - had been moved to Italian financial institutions.
The statement indicated the IOR had turned the corner after the
costly clean-up, saying that results for the first six months of
2014 showed a net profit of 57.4 million euros.
This puts the IOR on track to beat 2012 profits but that figure is
expected to be hit by impending structural changes.
Australian Cardinal George Pell, who heads the Secretariat of the
Economy set up this year to oversee Vatican finances and stem
scandals, will announce a major down-sizing on Wednesday, ending the
IOR's asset management business and retricting its remit to
providing payment services and financial advice for religious
orders, charities and Vatican employees, sources said.
French businessman Jean-Baptise de Franssu is expected to be named
as the new head and the Holy See's assets are expected to be managed
by a newly created department, the sources said.
(Editing by Louise Ireland)
[© 2014 Thomson Reuters. All rights
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.