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 Leo and everyone else just need to relax. It was an accident. If you doubt that, you’re an anti-Semite.
If you doubt such sarcasm is antisemitic, you’re antisemitic.
WOW, 🤯 that was blunt!!! It’s possible to love the Jews but condemn the State of Israel! And many Jews do it!
Tony W. Arn’t you open to a dissenting opinion?
Because we know that shrapnel never causes collateral damage…
I can assure you that I am not an antisemite and having a missile strike a Catholic church full of innocent people is not acceptable. What kind of people have we become when we can shrug off this type of collateral damage as “an accident.”
Shrapnel does not a missile make.
How many churches were damaged by the allies during WW2? War is heck.
So Netanyahu called Pope Leo, eh?
Would it be too much trouble to let us know what Netanyahu said to him?
Yes, bineyman, it’s reported that a call was made but then tells us nothing of substance. A waste of precious ink.
I wonder why Leo XIV doesn’t ask Netanyahu to send his foreign minister to Castelgondolfo for a meeting with the leader of Hamas to end the ighting? Leo should invite the leader of Hamas.
“Fragments of a projectile”? Looks like a direct hit. The Church is completely destroyed. Well they’ve been itching to get rid of it since the war started. Never mind, There’s probably somebody sheltering there who might say something rude about Tel Aviv in the future. Prevention is better than cure, eh? Come to think of it, there’s probably people in Tierra del Fuego or Timbuctu who might also say rude things. Perhaps they need a few bombs too. Words are so hard to bear. Oh dear.
Yes, it was a direct hit from an explosive (i.e. shrapnel-filled) tank shell.
Israel is employing its usual diabolical sophistry (“the unaimed shrapnel did it!”) to excuse itself.
Diabolical?
If the problem that developed in Nigeria is because of a direct deliberate withholding of intelligence by Israelis, noticing it as it becomes apparent would not be from “hating Israel” or from being a “hate Israel firster”. If the US also has been withholding it doesn’t mean reacting against that is being hateful of the US.
I am skeptical of Israel’s explanation of the attack being an “accident”. They gave the same excuse, when they deliberately and intentionally attacked the USS Liberty and killed our sailors.
Why does the American media give so little coverage to these all
too frequent “mistakes” by the Israeli military forces”?
The Judophobia is strong in this comment section.
Pius XII did say we were all spiritual Semites, but he rejected Zionism, and Tel Aviv’s jurisdiction over Jerusalem, which remain the Church’s positions to this day. The Church began diplomatic relations with Tel Aviv a few decades ago (as did the Palestinians), but only as recognition of a political situation on the ground, not as a Jewish state per se. Catholics (unlike certain evangelical groups) ought to keep to the Church’s official, constant position on this issue; it’s based on faith, not politics. The Church has supported a two state solution (outside Jerusalem) ever since it became an option. The continuation of the war in Gaza for years after Gaza’s foray outside itself was defeated, has only one purpose – to make a two state solution impossible. But a just war does not entitle even an aggrieved party to annihilate another nation by ethnic cleansing.
But the main question the Christian West should be asking is: what about our sacred places? What about the Christians in Palestine? That should be the focus of our tears and anger.
I do not particularly care to embrace the political positions of any pontiff, as they are far outside the realm of his infallibility and are frequently outside the realm of good sense.
(Incidentally, you are thinking of Pius XI, not XII, as the pontiff of “spiritually we are all Semites”.)
In a word, “the Church’s” (really “the Vatican’s”) position on Zionism and the two-state solution and jurisdiction over Jerusalem is not authoritative for Catholics and enjoys all the sense of the Vatican’s position on the United Nations. A two-state solution was feasible eighty years ago and was rejected by the Arabs. The idea that it will work now is pure geopolitical folly. Israel has a better historical claim to Judea and Samaria than it does to the Mediterranean coast, and any Palestinian state would unquestionably be either a state sponsor of terror or ineffective in stopping it.
You parrot the common blood libel of “ethnic cleansing” (and it is blood libel), blissfully ignorant of the requirements of urban warfare and apparently of the large Arab Israeli population.
The war in Gaza is to destroy one of the most notorious terror organizations in the world. It is every bit as jest as the Allied crusade against Nazism or Japanese militarism.
It is furthermore fallacious to claim that the war in Gaza has or will make a two-state solution impossible. Hamas made it impossible by showing what a Palestinian state would do.
Thank you Spiritual Semite for stating the facts of the matter with brevity and clarity. Hamas, by their shocking actions over many years now have clearly demonstrated with hideous clarity that the ‘2 state solution’ is an absolute impossibility. A lot of contributors to this thread need to ask themselves why it is that to this day no Arab state has taken in a single refugee from Gaza.
Good post, Mr. Cervantes, an excellent summary.
There is no ethnic cleansing taking place, and it’s inappropriate to make that false accusation. The Palestinians have consistently rejected a two state solution, so their situation is largely their own doing.
It almost never fails.
Let’s not call it a phobia, but what it is: hatred.
It’s a disorder I believe. Scapegoats provide a rationalization for our failures. It’s easier to blame others for life’s disappointments and our own weaknesses.
I had a family member who ended up like that. Everything wrong with the world became the fault of Jews and immigrants. It’s sad.
I really hope the pope will also urge the release of Israeli civilian hostages.
I stand corrected. Saying a two-state solution is impossible because of the regime in the smaller part of Palestine, Gaza, is Luke saying that a German star was forever impossible because of the Nazi regime. Hamas was defeated is conventional warfare a few weeks into the conflict. That it is still able to conduct guerilla warfare is no teaspn the ethnically cleanse Gaza. If you affirm this, then you affirm that the English would have been right to ethnically cleanse the Irish, who continued for many generations to conduct rather deadly guerilla campaigns against the occupation and its local allies. These campaigns repeatedly killed far more than the 400 civilians and 300 soldiers Hamas did three years ago, and which you seem to consider a kind of Year Zero.
The Catholic Church’s position on Zionism and Zionism’s jurisdiction over Jerusalem isn’t politics, as you claim. Catholicism can’t identify the OT people with a Mitteleuropan political movement based on secular nationalism. Nor would it identify the OT state with contemporary Orthodox Judaism. The only claim Tel Aviv can have is its might is right notion, which the Vatican accommodates with its support for a two-state solution. This solution is politics, yes, and leaves untouched the Church’s position on Zionism and jurisdiction over Jerusalem.
Your second paragraph is risible bunk. The Church has no authority whatever to declaim on a geopolitical solution to the Zionist question. If anything, she can only affirm the special relationship of the Jewish nation to its land.
Your first paragraph repeats again the malicious lie that Israel is interested in “ethnically cleansing” Gaza, then compounds this with the military nonsense that counterinsurgency must under my view necessitate or justify such “cleansing.” This is preposterous. Military operations can and do, however, often necessitate urban warfare to uproot an entrenched enemy. You ought to familiarize yourself with military history.
“Catholicism can’t identify the OT people with a Mitteleuropan political movement based on secular nationalism. Nor would it identify the OT state with contemporary Orthodox Judaism. ”
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I don’t think Israelis are over-concerned about what some Catholics may believe about this. Attempting to assimilate & placate the prevailing class is what doomed many German Jews. It was a fool’s errand. Jews have always been the perfect scapegoat & Israel has been the only place they can feel relatively safe. Even there they still have to watch their backs.
The discussion with the other writer only concerned Catholic views on the issue. We are allowed to have views and discuss them? Thanks there.
The Vatican is a sovereign state which recognise other states if it chooses.The Church can and must try to intervene in secular affairs when higher principles are seriously violated by civil societies. It always has.
Netanyahoo’s Deight at Trump’s proposal to deport Gaza’s population only confirmed what his policies on the ground are doing. Do you agree that the removal of Gaza’s population to other countries would be immoral?
I can’t tell who your question is addressed to Mr Cervantes, but I personally believe Gaza should be completely evacuated. It’s unsafe for human habitation. To keep civilians there in harm’s way is immoral. But every civilian death scores Hamas propaganda points so they have no incentive to encourage the people to leave.
It’s unlikely any people would consent to being ethnically cleansed. The bravery of the Palestinians is incredible.
Jews have survived a very long history of attempts to exterminate and “ethnically cleanse ” them. They’ve know the reality of those words. Not the political invention.
Gaza needs to be evacuated ASAP and the hostages released. But Hamas has no incentive to do that because their sources of revenue would dry up.
The incredibly brave Palestinians of Gaza don’t need to be ethnically cleansed.
To call the Palestinians “brave” is, in the main, a despicable misuse of the word. The true bravery lies with the Israeli people and their righteous war.
The voluntary emigration of Palestinians from Gaza is certainly not immoral and would be excellent politics.
If you seriously believe their exit would be voluntary, there’s little point discussing the issue. But do you believe the removal of Gaza’s population to other countries would be moral? Last chance to give a straight answer.