In move to transparency, Vatican bank issues first report

An exterior view shows the tower of the Institute for Works of Religion (IOR), the Vatican bank, in Vatican City in this 2011 file photo. REUTERS/Stringer/Files

By Philip Pullella VATICAN CITY (Reuters) - The Vatican bank, dogged for decades by scandals and opaque dealings, published the first annual report in its 125-year history on Tuesday. The report covered 2012, a tumultuous year that saw its former president ousted in a boardroom battle and leaks of documents on internal disagreements on how it should be run. Bank President Ernst Von Freyberg, who started his job this year, said the 100-page report was an attempt to meet the commitment to transparency that Catholics around the world "rightfully expect". A five-member committee appointed by Pope Francis, who has promised to clean up the Vatican's financial image, is also preparing a report on how to reform the bank, officially known as the Institute for Works of Religion (IOR). The IOR said that in 2012 it had a net profit of 86.6 million euro ($117.23 million), more than four times greater than the 20.2 million euro profit in 2011. The report, whose figures were audited by KPMG, said the huge increase in net profit was due mainly favorable trading results and higher bond values. It said 54.7 million euro of the profit was transferred to the budget of the Holy See to help the pope carry out the Church's mission around the world. It also revealed the extent of the IOR's holdings in gold, coins and other precious metals (41.3 million euros), that it had a stake in an Italian real estate company, and received two inheritance properties worth about 2 million euros in 2012. The bank's stated aim is to hold and manage money for Vatican departments, orders of priests and nuns, Catholic institutions and related entities, clergy and Vatican employees. DECADES OF SCANDALS But it has been enmeshed in scandals in the past three decades, most notably in 1982 when it was caught up in the fraudulent bankruptcy of Italy's Banco Ambrosiano, whose president Roberto Calvi was found hanged under a bridge in London. More recently, it has been caught up in an investigation by Italian magistrates into money laundering, which the bank denies, and the arrest of a Vatican prelate who has been charged with money smuggling. Pope Francis has not excluded the possibility of closing down the IOR but most likely it will soon see extensive reform. Reuters has learned that as part of the current review, the bank is likely to close all accounts held by foreign embassies, following concerns about large cash deposits and withdrawals by the missions of Iran. The numbers aside, the report was dotted with words that made clear 2013 could be a crucial year for the bank, which traces its origins to 1887 and has been in its current form since 1942. In his introduction, Cardinal Tarcisio Bertone, the outgoing Secretary of State, spoke of "reform" and "a new direction" for the bank. Other officials spoke of "change" and "transformation". Freyberg, a German, has hired the U.S.-based Promontory Financial Group to review all accounts held by the bank's some 19,000 customers, help tighten anti-money laundering procedures and carry out special investigations. "We have reviewed our procedures for taking on clients and for dealing with clients to make sure that no money laundering can happen at the institute," he told Vatican Radio. "We do have a new handbook, we do have new procedures, and we are also ready for inspection by third parties." He said in the report that the IOR expects to have extraordinary expenses in 2013 resulting from the high cost of the reform process. Apart from Promontory, Freyberg has hired a team of financial public relations consultants. (Reporting By Philip Pullella; Editing by Angus MacSwan)