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Vatican Bank Gets New Management and Marching Orders From the Pope

Pope Francis

Photograph by Franco Origlia/Getty Images

Pope Francis

Cleaning up the Vatican Bank is turning into a multi-year chore for Pope Francis.

The bank will now replace its supervisory board and top executives in the latest move by the pope to overhaul an institution tainted by allegations of mismanagement, corruption, and money laundering. The move comes ahead of an announcement, expected on Wednesday, that the bank will no longer provide asset-management services and will instead focus on financing church-related work.

“We are creating simpler, more efficient structures for those serving the mission of the Catholic Church,” said Cardinal Prefect George Pell, an Australian cleric named to help restore order at the bank.

Still, it’s clear the Vatican Bank continues to struggle with fallout from its troubled past. In its annual report, also released Tuesday, the bank said profits dropped 97 percent in 2013 after it took €28.5 million ($38.7 million) in write-downs on investments made during 2012 and early 2013, before the new leadership took over. A bank spokesman told the Financial Times that the losses stem, in part, from a €15 million loan to a company owned by a friend of Cardinal Tarcisio Bertone, who served until last year as the Vatican’s Secretary of State. The bank said it also closed some 3,000 client accounts, including several hundred found not to comply with more stringent supervisory rules established last year.

Since taking office in March 2013, Pope Francis has moved repeatedly to strengthen oversight and management of the bank while weakening the influence of clerics who were previously in control. Just last month, the pope replaced all members of the Vatican Bank’s financial regulatory board, bringing in outsiders such as Juan Zarate, a Harvard professor and former U.S. deputy national security adviser. Pope Francis fired the bank’s director and deputy director last year, removing four cardinals from its supervisory board.

The changes have occurred so rapidly that many of those being replaced have held their jobs only a short time. They include Ernst van Freyberg, president of the supervisory board, who was named by former Pope Benedict XVI only 16 months ago. Van Freyberg had spearheaded an internal effort to improve transparency and regulatory. “Through this work we have laid the ground for a new team,” van Freyberg said in a statement.

Matlack is a Paris correspondent for Bloomberg Businessweek.

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