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Analysis: 2020, the year to make or break Vatican finances?

July 10, 2020 CNA Daily News 2

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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Conjoined twins can have ‘normal lives’ after Vatican hospital performs separation surgery

July 8, 2020 CNA Daily News 1

CNA Staff, Jul 8, 2020 / 01:00 pm (CNA).- Twins who were conjoined at the head are likely to return home within months from the Vatican’s pediatric hospital where their bodies were successfully separated by doctors, and they have a high chance of living normal lives, the hospital’s chief neurosurgeon told CNA.

The Bambino Gesù Hospital announced the successful separation surgery July 7, saying it was the first operation of its kind in Italy and probably the world.

 

Separate due gemelle siamesi unite per la testa. È il primo intervento di questo tipo in Italia e, probabilmente, l’unico al mondo per una delle più rare e complesse forme di fusione a livello cranico e cerebrale. Oggi stanno bene e possono crescere come le bimbe della loro età pic.twitter.com/1S3YwHkuq8

— Bambino Gesù (@bambinogesu) July 7, 2020

 

The final stage of surgery, which took place on June 5, lasted 18 hours and involved more than 30 medical staff. The two-year-old sisters are expected to make a full recovery.

“We have been able to accomplish an extraordinary result despite such a complex malformation, being able to separate with an optimal clinical result. From a neurological standpoint, the two little girls are doing very well and have excellent prognosis for normal lives in the future,” Dr. Carlo Efisio Marras, director of neurosurgery of the Bambino Gesù hospital told CNA July 8.

“This accomplishment is the fruit of more than a yearlong work of investigation and preparation involving several specialties and professions within the hospital. There were many difficult phases since several surgical procedures were needed, each one with its own challenges,” Marras told CNA

“But the most difficult one involved the venous system, that is, the network of vases that brings blood from the heart to the brain to bring oxygen to it. If we would have not succeeded in deal with this system shared by both babies, the result would had been catastrophic.”

“But the two little twins are well: we believe they can be released in a few months. They will have to go through a rehabilitation phase to learn the motions they were not able to perform previously. I wholeheartedly wish them a happy future. They are now in the condition to return to a normal life.” 

“I have to thank my hospital, which is known for bringing together research, development and solidarity, for this extraordinary experience,” Marras added.

The hospital said the twins, Ervina and Prefina, were born on June 29, 2018 in a village about 60 miles outside Bangui, the capital of the Central African Republic. They were joined together with “one of the rarest and most complex forms of cranial and cerebral fusion,” known as total posterior craniopagus.

Mariella Enoc, president of the Bambino Gesù, met the twins in July 2018, during a visit to Bangui, where the sisters had been transferred after their birth. Enoc was helping to oversee the expansion of pediatric services in the country, which is one of the world’s poorest, in response to an appeal from Pope Francis. She decided to bring the girls to Rome for surgery.

“When you encounter lives that can be saved, it must be done. We cannot and must not look away,” she said at a press conference Tuesday.

The twins arrived in Italy with their mother, Ermine, on September 10, 2018. Initial tests confirmed the sisters were healthy, but had different blood pressures, indicating that one of the girls’ hearts had to work harder to maintain the healthy functioning of their organs, including their brains.

The hospital said the twins were joined via the back of the head, including the nape, sharing both skin and cranial bones. But the greatest challenge for doctors was that they were joined at a deeper level, sharing membranes inside the skull as well as the venous system, through which blood used by the brain is transported back to the heart.

The hospital emphasized that the sisters had distinct personalities, describing Prefina as “playful and lively,” and Ervina as “more serious and observant.”

A multidisciplinary team, including neurosurgeons, anesthesiologists, and plastic surgeons, prepared for more than a year for the operation to separate the twins. The hospital’s ethics committee contributed to a plan ensuring that the girls would have the same quality of life.

The separation took place in three stages. In the first, in May 2019, neurosurgeons started to separate and rebuild the membranes and venous systems.

The second, a month later, focused on the confluence of sinuses in the brain. The hospital said it was a critical phase of the treatment as “the operating space is a few millimeters.”

The two operations prepared the girls for the third and final phase of complete separation on June 5.

“It was an exciting moment, a fantastic, unrepeatable experience. It was a very ambitious goal and we did everything we could to achieve it, with passion, optimism and joy. By sharing each step, studying every single detail together,” Marras said.

Bambino Gesù, colloquially known as the “Pope’s hospital,” is among the most important pediatric hospitals in the world. Founded in 1869 by the Duchess Arabella Salviati, the hospital was donated to Pius XI in 1924, with the aim of giving it a more stable future. While the hospital is located in Rome, rather than Vatican City, it is situated in an extraterritorial area administered by the Holy See.

The hospital said Tuesday: “A month after the final separation, the twins are doing well. … On June 29 they celebrated their second birthdays, looking into each other’s eyes, moving their little hands to the rhythm of music, in the arms of their mother.”

“They have undergone very difficult operations; the wounds will take some time to heal; the risk of infection is still present. The neurorehabilitation program continues and for a few months they will have to wear a protective helmet.”

“But post-operative checks indicate that the brain is intact. The recreated system works, the blood flow has adapted to the new path.”

Speaking at the press conference, the girl’s mother, Ermine, said: “If we had stayed in Africa I don’t know what fate they would have had. Now that they are separate and well, I would like them to be baptized by Pope Francis who has always taken care of the children of Bangui. My little ones can now grow up, study and become doctors to save other children.”

 

 

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