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updated: 7/8/2014 8:20 AM

Pope to replace vatican bank managers as profit drops 97%

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Bloomberg News

Pope Francis plans to replace the board and executives at the Vatican Bank after a year of reorganization at the scandal-plagued institution in which more than 2,000 accounts were blocked and profit dropped 97 percent.

"With the support of the Holy Father and the Council of Cardinals, we are creating simpler, more efficient structures for those serving the mission of the Catholic Church," Cardinal-Prefect George Pell said today in an e-mailed statement. Net income at the bank, known as the Institute for Religious Works, or IOR, plummeted to 2.9 million euros ($3.9 million) from 86.6 million euros in 2012.

Francis, 77, has focused on improving transparency and compliance at the IOR, which was tainted last year when a senior Vatican cleric was arrested in Italy on fraud charges. The pope relied on Chairman Ernst von Freyberg, appointed last year under Francis's predecessor, Benedict XVI, to comb through the bank's accounts and holdings for mispriced assets and suspicious accounts.

The profit decline was primarily due to a 16.5 million-euro trading loss tied to writedowns and fluctuations in the value of the IOR's gold reserves. The trading result was 51.1 million euros in 2012. The IOR blocked accounts for 1,329 individual clients and 762 institutional clients, it said.

The Vatican's Finance Ministry will hold a press conference tomorrow to outline its new strategy for the bank.

Banco Ambrosiano

The IOR, set up in 1942, oversees about 6 billion euros of customer assets. Three decades of scandals, from the Banco Ambrosiano failure in the 1980s to the freezing of 23 million euros by Italian prosecutors in 2010, have tarnished the IOR's image and prompted Francis, who was elected by church cardinals in March 2013, to make financial transparency a priority.

"Over the past months this often painful but very necessary process has opened the door to a new, unburdened future of the IOR," von Freyberg said in the statement. Pell thanked von Freyberg and the board in the statement.

The IOR's past includes its implication in the fraudulent bankruptcy of Banco Ambrosiano three decades ago, a scandal that culminated in June 1982 when Ambrosiano's former chairman, Roberto Calvi, dubbed "God's banker," was found hanged under London's Blackfriars Bridge. While admitting no wrongdoing, the Vatican paid $240 million to Banco Ambrosiano account holders in 1984.

The Vatican's new finance ministry, known as the Secretariat of the Economy and headed by Pell, was created by the pope this year. Last month, Francis replaced the board of the bank's regulator, adding influential outsiders like Juan Zarate, a Harvard professor and former U.S. deputy national security adviser.

(An earlier version of this story was corrected to show the trading result of 51.1 million euros was for 2012.)

To contact the reporter on this story: Andrew Frye in Rome at To contact the editors responsible for this story: Alan Crawford at Leon Mangasarian, Kevin Costelloe

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