Washington, D.C. Newsroom, Jul 10, 2020 / 04:00 pm (CNA).- The Holy See is facing a perfect storm of a massive income shortfall, months of financial scandal, and a looming international banking inspection. As it prepares to weather the second half of 2020, a range of measures have been taken to shore up its finances and reputation. But will they be enough, or could they end up making matters even more complicated?
According to an apparently leaked internal memo published on Monday, all curial departments of the Vatican have been asked to move all their cash deposits to the Holy See’s central bank. The move signals the depths of the current liquidity crisis facing the Vatican, and raises a number of questions about its ability to mitigate it.
On July 7, Vatican journalist Marco Tosatti published the text of a letter supposedly sent to the heads of all curial dicasteries on May 8. Fr. Juan A. Guerrero, S.J., prefect of the Secretariat for the Economy, said in the letter that the decision was taken after a May 4 meeting, led by Pope Francis, to respond to “this particularly negative economic juncture.”
According to the text of the letter, every Vatican department has been asked to move all their external cash deposits to APSA, which functions as the Holy See treasury, sovereign wealth manager, and administers payroll and operating expenses for Vatican City.
CNA asked the Holy See to confirm or comment on the leaked letter but received no response.
The instruction to move all curial funds to APSA is a dramatic step, exceeding previous attempts at financial centralization under Guerrero’s predecessor, Cardinal George Pell. It points to an acute cash crunch for the Holy See, and raises the possibility that it may already be struggling to meet daily operating expenses, including payroll.
In May, Guerrero said that in the wake of the coronavirus pandemic, the Vatican is forecasting a reduction in income between 30%-80% for the next fiscal year. While dismissing suggestions that this could lead to a default by the Holy See, Guerrero did say “that doesn’t mean that we are not naming the crisis for what it is. We’re certainly facing difficult years.”
Despite the loss of income, some Vatican departments maintain large investment and asset portfolios, most notably the Secretariat of State and the Congregation for the Evangelization of Peoples (Propaganda Fide).
But while moving all cash reserves and deposits held at external banks to APSA could provide a short-term liquidity bridge for the Holy See, it could also create fresh regulatory headaches for the Vatican, and will likely be difficult to achieve.
As CNA has previously reported, the Secretariat of State has maintained large cash balances with several external banks, including in Switzerland. However, transferring the balance of those funds could prove a far from straightforward process.
As reported previously, secretariat funds on deposit were used as security against a $200 million line of credit extended by two banks, Credit Suisse and BSI. The loaned funds were used, in part, to fund the secretariat’s controversial investment in a London building at 60 Sloane Avenue, which has led to the suspension of several curia officials and the arrest of Italian businessman Gianluigi Torzi.
In recent months, Swiss financial authorities have confirmed that several bank accounts, with balances totalling tens of millions of euros, have been frozen as part of an ongoing investigation into the London deal, led by Vatican prosecutors, making them likely hard to transfer.
It is also not clear if the arrangement of using cash deposits as collateral to secure loans to fund investments remains an ongoing practice for the secretariat with other banks. If it does, transferring those deposits to APSA could trigger the banks to call in their loans, adding a credit crunch to a cash shortage for the Vatican.
The text of the leaked letter from Guerrero appears to acknowledge some potential difficulties for different curial departments in complying with his “request,” noting that “where it is necessary to maintain a deposit with IOR or other banks for operational needs, I am kindly asking you to communicate this to this Secretariat [for the Economy] as soon as possible.”
Even if the Secretariat for the Economy is able to have all curial cash moved to APSA without serious financial penalties or complications, and even if this is sufficient to provide for the Holy See’s short-term liquidity needs, the move could still create other unexpected difficulties for the Vatican.
In September, Moneyval, the Council of Europe’s anti-money laundering watchdog, is set to conduct a two-week onsite inspection of the Holy See and Vatican City – the first since 2012.
The president of the Vatican’s Financial Information Authority, Carmelo Barbagallo has described the inspection as “especially important.” “Its outcome may determine how the jurisdiction [of the Vatican] is perceived by the financial community,” he said on July 3.
Moneyval is expected to arrive with its own list of concerns and questions following months of reporting on Vatican financial scandals. A key item on its agenda is likely to be the role of APSA.
Following the last onsite inspection in 2012, APSA agreed to stop providing services to individuals or taking part in commercial transactions, with these functions being transferred to the Institute for Religious Works (IOR), often referred to as the Vatican Bank, which maintains accounts for Vatican employees, individuals and religious groups. APSA was to be limited to administering the sovereign assets of the Holy See, meeting payroll and operational costs, and functioning as the national reserve bank of the Vatican.
In exchange for agreeing to step back from commercial activity, APSA was exempted from annual inspections by the Vatican’s Financial Intelligence Authority (AIF), whose efforts are in turn assessed by Moneyval.
In 2014, Pope Francis issued new norms, transferring oversight and control of APSA’s remaining investment functions to the Prefecture for the Economy, then headed by Cardinal George Pell.
The AIF’s 2015 annual report concluded that since it is no longer an “entity that carries out financial activities on a professional basis,” “APSA stopped being a part of AIF’s jurisdiction at the end of 2015.”
The 2015 AIF report which exempted APSA from further scrutiny said that “If APSA were to carry out financial activities on a professional basis, it would fall again under the jurisdiction of AIF which… must publish and update the list of subjects who must comply with the requirements set forth in [relevant law].”
But last year, Bishop Nunzio Galantino, head of APSA, acknowledged that it had loaned 50 million euros to finance the purchase of an Italian hospital, the Istituto Dermopatico dell’Immacolata (IDI), in 2015, even though APSA is prohibited from making loans that finance commercial transactions.
APSA was forced to write off 30 million of the 50 million euro loan, wiping out APSA’s profits for the 2018 financial year.
The acknowledgement by Galantino that APSA was in 2015 engaged in prohibited lending activity will likely have attracted the attention of European financial watchdogs, who will want to discuss it in September.
In 2016, Pope Francis partially reversed some of the 2014 reforms, returning control of its investment activity to APSA from the Prefecture for the Economy.
That APSA is engaged in financial activity that requires oversight was underlined when, in June this year, Pope Francis moved the office of the Vatican’s financial records database from APSA back under the management of the Secretariat for the Economy — a move explicitly made to emphasise the need for external oversight.
When Moneyval arrive in September, they are likely to push for a renewed look at the role of APSA and its exemption from AIF and Moneyval’s vigilance – all the more so if it becomes the home for all curial assets.
Some Vatican departments, most notably the Secretariat of State, remain engaged in commercial investments as part of their ongoing financial activities. If, as Guerrero’s May 8 letter indicates, all, or even most, liquid curial assets are now being banked with APSA, it will raise serious questions about how those commercial ventures are being maintained, and if APSA can still credibly claim to play no part in commercial activity.
2020 has become an incredibly high-stakes year for the Vatican, on the line is its ability to continue daily operations and remain a respectable member of the financial community.
Returning to financial health and international credibility are, in many ways, tied together for the Vatican. But after years of regulatory chaos and dubious financial conduct, it remains to be seen if 2020 is a crisis year that makes those efforts come good at last – or finally breaks the bank.
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Peace is precious. Non-violence is a time tested value. Democracy is a continuous process. In a democracy, each one is invited to contribute to the peace process. Long live democracy.
I am glad that the US is not a democracy, but a republic, since all democracies end in tyranny. Donald Trump was elected on Nov. 3, but morning came and it was stolen with tens of thousands of illegal ballots. They told us beforehand what they were going to do and they did it. If Biden is installed on Jan. 20 we will then be a banana republic. And one other thing, most of the protesters were let in by the police and were antifa. President Trump’s voters are peaceful protesters unlike the demoncrats.
Yes, this must be condemned, this movement (Pope Francis). Francis correctly calls for healing the violence. Condemn the movement? The movement is at least 72 million Americans who voted for Trump, many who faithfully hold to Catholicism. Who are against abortion. Who risk defending the unborn. Who reject homosexuality and its threat to the traditional family. Who are willing to stand up for religious liberty. What keeps us together as a Nation is exactly this sense of revolutionary Liberty of the founders, a belief in God given freedom, the inherent rights to live without immoderate restriction, to believe in a saving God, corrupted by a Catholic Supreme Court justice Anthony Kennedy in his opinion defining liberty sans principals Planned Parenthood E PA v Casey. Likely the intellectual catalyst that divided more conservative Christians and Mid Westerners from urban hardened hostile Marxist socialists. Result of the election ignited the spark, the volatility of the speech, yes even Trump’s admittedly narcissistic but not wholly untrue speech, march, the attack on the Capital that is perceived as betraying that most valued premise of God given freedom. We’re in for a fight, or the cowardly decision to lay down and enjoy the remaining moments of just peace until that is wrenched away from us. Our challenge is in response to the question, where does justice lie? In keeping up political decorum? Certainly not in violence. Rather it’s in the determined quest for the true and the good. Our failure as a Nation with the election of a moral turncoat will end in the suffering, and hopefully to find in disaster the redemption of those of us who have failed themselves and country. And many of us God.
When the Pope speaks of condemning ¨this¨ movement, it is a stretch to interpret it as his condemning all who voted for Trump. He is referring to any movement that involves violence.
The Holy Father is quite likely not knowing the ground situation and is unaware of the nuances – the mainstream media tar everyone with the same brush and he probably naively believed that narrative.
It is obvious that those who entered the Capitol also included Antifa / paid actors. Plus some of the events were cleverly staged and raise a lot of questions.
https://www.youtube.com/watch?v=_0AM9xPFNFc
That said, re the ´many who faithfully hold to Catholicism´ bit – well the ´many´ bit is debatable. How many among that ´many´ adhere to the teaching of Humanae Vitae?
The tide will turn within a fortnight, and then of course, it remains to be seen what the ¨many…who reject homosexuality and its threat to the traditional family¨ are going to do when the ¨most pro-gay President¨ – https://twitter.com/LogCabinGOP/status/1296039209891819520 – continues his ´campaign to decriminalize homosexuality in 71 countries´ >> https://www.dailymail.co.uk/news/article-7092519/Trump-Republican-president-promote-LGBT-Pride-Month.html
What will they do when Trump ´accommodates´ the demand from some ¨Republican conservatives¨ such as https://logcabin.org/adoption/ (or those among them who will move to any new party that may be formed) to continue to allow ¨LGBT couples¨ to adopt or foster children?
Do those ¨who faithfully hold to Catholicism¨ have the numbers as well as the political will, courage, stomach and determination to overturn the ¨anthropological regression¨ of ´…laws “assimilating” homosexual relationships to marriage´? – https://www.catholicnewsagency.com/news/pope-francis-calls-for-civil-union-law-for-same-sex-couples-in-shift-from-vatican-stance-12462
´…(The Pope) expressed concern that if same-sex couples “are given adoption rights, there could be affected children. Every person needs a male father and a female mother that can help them shape their identity.”…´
This non-Catholic expressed one aspect of the problem: https://www.youtube.com/watch?v=KWpvf-tZWIY
The system is broken. We are broken.
Kyrie eleison!
Yes, all isn’t black and white. We, nevertheless, mustn’t adopt your presumed omniscience and disparaging response. We hold fast to Christ and as priests we witness fearlessly to his truth. He will not abandon us as long as we hold firm. That’s what I convey to the faithful and to you.
Unsure what led to the ´omniscience´ label. [As an aside, I was reminded of ¨The aims of leftist labeling and censoring of conservatives as extremists¨ – https://www.debatez.com/forums/topic/the-aims-of-leftist-labeling-and-censoring-of-conservatives-as-extremists/ – so is this a case of the shoe being on the other foot?!] 🙂
In any case, if it is because of the confidence (based on multiple reports from various sources) that some things will happen in the coming days including the reversal of the tide, – that does not mean I know everything, nor do I claim to be ´omniscient´.
´disparaging response´?
Again, another (wrong) perception / interpretation.
I was simply pointing out the truth as borne witness through the content in the cited web pages – the intent being to point out stuff that needs to be highlighted for the benefit of those who may not quite be aware of those things. That is to say, it was merely to indicate areas where there are inconsistencies and work to do – which that non-Catholic woman has also rightly flagged in some respect.
If I intended to be disparaging, I would not have included myself in saying WE are broken.
I’m not convinced that Pope Francis has a clue what he’s talking about when he wades into U.S. politics.
“But we have to understand well that it does not repeat, learning from history.”
Shouldn’t we do the same for McCarrick? The report published by Vatican didn’t seem to impress most people I follow. I haven’t read it myself, but have been hearing it’s essentially just a report of blaming here and there, instead of admitting what’s going wrong in the Church / Vatican and how it could be solved. As a Catholic, I’m really sad I have to write something like this as a public comment, but I think we Catholics deserve to know what’s really going wrong so we can work together to prevent the same thing. Unfortunately, our dear pope seems to prefer silence when people tried to clarify controversial / ambiguous topics.
I’m astonished that he is astonished. Did he not say to “make a mess” and that “chaos is good” and he would be” seen as the Pope who divided the Church?” Does he not know what the earthly result of that is?
And silence about the violence against Christians in China? Selective astonishment.
Well, yes.
Good point. Truthfully ,I was pretty astonished at the mayhem in DC but compare the state of affairs here to what’s going on in communist China.
I think of everything going on in the world that’s disturbing and our betrayal of Christians in China has to be one of the worst offenses. Imagine what the early missionaries would think of us.
I am astonished that the Pope, to by my knowledge, has issued no statement in response to the legalization of abortion in his native land. I am astonished that such a man is the Vicar of Christ.
The Pope is astonished and condemns the violence?? Where was he when the BLM and antifa crowd set a church on fire across the street from the White House last summer and Donald Trump stepped out alone to present a picture of calm and authority? For which he was, as always , attacked by the Democrats,who complained the rioters were roughly treated, and who seemed to have no trouble letting the country burn all summer in Blue states. In fact the DEMs took the trouble to kneel in solidarity with the rioters!!! But now they are shocked!! Shocked they say, that a few protesters trashed Congressional offices. I do not support anyone rioting. But even less do I support smug self-serving politicians such as those on the left. Rules/Laws are supposed to apply to ALL or they should apply to NONE. For more than 2 centuries Americans have grown used to being the objects of hate. We do not care what non-Americans think of us.