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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Pope Francis will not say this because of political reasons, but I will: this war along with its sufferings is caused by the unjust desires of only one human being, Vladimir Putin.
Certainly the recent aggression rests with Mr. Putin but what interests set up the scenario in the first place & put the Ukraine in harm’s way? The Western nations haven’t been doing the Ukraine any favors by offering them false hopes.
The Ukrainians don’t appear to have a single ally which is truly sad.
The following article of March 28 by Sandro Magister is the sober and necessary antidote to this article: http://magister.blogautore.espresso.repubblica.it/2022/03/28/ukraine-is-fighting-but-for-francis-no-war-is-just/
Perhaps someone should suggest that while everyone has the right to choose personal non-violent surrender, those responsible for the Common Good and the welfare of others have no right, for example, to sacrifice the necks of the wives and children to the knife of an assailant.
On May 3, 1983 the (United States) National Conference of Catholic Bishops published the pastoral letter: “The Challenge of Peace: God’s Promise and Our Response.” In this document, the pacifist ideology of unilateral disarmament (Pax Christi) was replaced. Pope John Paul II had placed Cardinal O’Connor in a review position and required the document to be submitted to Rome two or three times for clarity on moral principles (apart from ideology) and actual prudential judgment, e.g., “…Equally important in the age of modern warfare is the recognition that the justifiable [!] reasons for using force have been restricted to instances of self-defense or defense of others under attack” (n. 214).
Also in 1983 the German and French bishops’ conferences published pastoral letters (German: “Out of Justice, Peace;” and French: “Winning the Peace”), printed together by Ignatius Press in 1984 under the editorship of James V. Schall, S.J.). The three pastorals stressed, alternatively, the danger of nuclear holocaust and the place for deterrence, the danger of Soviet weapons superiority along the then Iron Curtain, and the danger of state-sponsored Marxism. But none was pacifist.
In the interests of synodality (!) perhaps these sober assessments by bishops’ conferences should influence papal one-liners tending to criminalize self-defense (somewhere: “all wars are unjust”).
Yet, there is also the point to be made, with needed force and precision, that the lucrative arms trade does tilt toward easy escalation (anywhere) almost inevitably toward global disaster. But it is precisely at such times that one hopes for, and has a right to look forward to, from the perennial Catholic Church, very measured application of moral theology to increasingly complex, concrete circumstances. Is Putin listening? North Korea? Iran?
In the circumstances of Gethsemani, Peter was instructed not to use his sword, but was he told to never own it?
Agreed
If only more Pto-Life Christians , Catholic Christians, gather in Earnest with Discernment?
Was not evangelism of Billy Graham , Johnathan Edwards, Saint Paul, put to shame and guilt?
Wether in 1949? Or 1743? There was need!
When a man, a woman, can stay in need of redemption but not a distinguishing mark of wanting treat change
“PICK UP YOUR MAT AND WALK”, “YOUR SINS HAVE BEEN FORGIVEN”. “Now, Go and SIN no more”
Words of such force and magnitude.
What is the difference in your life? What is the difference in my life?
Let me be partially sarcastic – how long will it be until the Pope says something to which the powers-that-be at twitter take offense and cancel him, or whatever it’s called.
FYI – I have NO social media accounts, or whatever they’re called, and have no intention of changing that. If that puts me out of touch, so be it. I confine my ruminations(?) to CWR.
You’re so right. The propaganda media love Bergoglio. In 10 years I have never read so much as a word of criticism of him. Thank you for pointing this out.
Obviously you do not read widely. Sandro Magister and some rad trad anti-Pope Francis sites seem to be your sources.
As usual, your ignorance and malice are on full display. I explicitly referred to the liberal propaganda media of which you are a feckless myrmidon.
I usually read these four Catholic sites: CWR, NCRegister, wherepeteris, and Vatican news. Which ones do you consider to, be liberal? Oh, and I read mercatornet, which is not strictly a religious site, but it is more Catholic than most Catholic sites.
It’s complex! The common adage when caught between seeming offsetting principles. One humorous anecdote was the advertisement of a hapless [former] roommate standing by a pile of belongings being thrown out the apartment window by a visibly impervious woman. A passerby stops and looks at him quizzically, he responds, “It’s complicated!”.
Where do we find justice? For heroic Ukraine, as well as land grubber, cowardly giant Russia [how the entire media, US generals, both political parties view the matter for once all are unanimous]. How simple! Would that it and other issues were so easy to judge. Although Russia is [presumably by natural law itself] a perennial demon. That makes unanimity on Russia easy. How can any just claim for security from Nato [let’s not forget Nato is as a dangerous to Russia as it is to Papua New Guinea, perhaps even Pago Pago].
Now the war cry is, let’s destroy Russian ambition by destroying it’s army in Ukraine. War criminal Vladimir Putin [or is it Rasputin?] has cast his evil spell on the Russian people. Unfortunately, his policy of devastation of Ukraine by bombardment when land forces fail fulfills the prophetic vision of credentialed pundit and armchair world strategist. So the arms continue to pour into Ukraine, perhaps far more lethal in the making, the killing and misery continues on increasing scale, the war cries reaching ‘fever pitch’.
Maybe, perhaps maybe, in this one instance, Pope Francis is correct in calling war, all war bad. After all, it’s against the odds that he’s always wrong.
One wonders just who Pontiff Francis thinks he’s talking to.
Q1 – Is he suggesting that Ukrainians are immoral for fighting against a foreign army that invaded their country?
Q2 – Is he preaching to the choir so that he can say he said something about the Russian invasion of Ukraine, but has carefully calibrated the statement to be sure it is without any meaning?
Chris, although I agree Pope Francis is generally ambivalent, as he seems here, he did, for example, say to the media earlier in reference to Ukraine, “That when a country is attacked it defends itself, everyone, including civilians”. He added that Russia’s attack was a massacre. His fear of a nuclear confrontation [even a tactical nuclear exchange would be devastating for Europe and the US] has justification with an escalating proxy war. Biden is making wild comments that could cause an apparent paranoid Putin to respond.
Pope Francis has been denouncing this war right from the beginning of this invasion. He is not preaching to the choir but to the world. He is, and has always been, against war.
Malware alert! Yes and no…
Pope Francis first denounced only the “conflict”, which is different from later publicly recognizing this “invasion” (your word) as an act of “war” (your word). His earlier comments were received by many as meaning “neutrality” in the face of overt aggression (https://www.wsj.com/articles/pope-francis-laments-war-in-ukraine-without-taking-sides-11648226928).
So, yes, Pope Francis broadly denounces war; yet, the earlier non-position implied that both parties are equally guilty–that self-defense is immoral.
Pope Benedict XV likewise denounced World War I, but at least he had a plan rather than a platitude (“To the Belligerent Peoples,” August 1, 1917).
Summarizing, his propositions for that war were the need to assert moral force over material force, simultaneous disarmament, arbitration in place of conscription, free movement of people and commerce especially at sea, restitution of territories seized during the War (!), and harmony among national aspirations and with the common good (!). Dismissed at the time, parts later reappeared (without attribution) in President Wilson’s Fourteen Points of Peace (Jan. 8, 1918), one of which became the right to national self-determination.
Unlike the AT & T smartphone advertisement, it is complicated.
Upon reflection, I find that my use of the word “platitude” is inaccurate and probably unjust….Without knowing the right word, my meaning goes something like this…
First, the hair-trigger nature of modern technology with its catastrophic potential does raise novelties not in play when Augustine defined the just war.
Second, if it is true (?) that papal advisors are thinking about an exhortation amending just war theory, I would hope such a statement does not displace concrete prudential judgment with undefined “fraternity.”
Third, instead, on the application of moral theology (Catholic Social Teaching) to very convoluted circumstances on steroids, did Catholic academia abdicate its potential contributions the moment it claimed the total autonomy of the Land O’ Lakes Declaration (1967)? Overwhelmed now by administrative hyper-compartmentalization, plus the trendy ideologies of identity politics and intersectionality and STEM—who is left to help an overtaxed Pope Francis answer such modernday conundrums as subsidiarity and solidarity, both together, and the (forgotten) Common Good?
How, too, to clearly articulate both the nature and backstory of global flash points, while also affirming with courage that there is no peace without justice, and no justice without truth?
What is truth? Other than mislabeled “platitudes,” what is the knitty-gritty right word (in addition to the Word) for all of the above? What is our protection from too-simply airbrushing that all war is immoral—even measured self-defense, or deterrence against rogue-state nuclear blackmail?
One can denounce the war in different ways. Pope Francis, who condemns war in his writings, played an active role behind the scenes which only his stance allowed him to do. But since that was to no avail, he took a tougher stance. The correct strategy I thought.
Given Pope Francis’s inability exercise restraint on what he says and does in public, and repeated contradiction of existing, unchangeable Church doctrine, not only on Just War Teaching, but also other issues (such as support for homosexual unions, and his averment that Apostates “remain part of the Church”), I think it would be fair to ask about his mental state and whether he still healthy enough to hold office. Many experts have, after all, questioned the mental health of President Biden and former President Trump for the same or similar reasons.
If he is losing it, then his handlers are guilty of elder abuse by parading him around and allowing him to humiliate himself.