Money Rehab with Nicole Lapin
Holy Finances and a Financial Hole: the Money Trail of the Vatican
Mon, 12 May 2025
Today, Nicole is pulling back the curtain on a financial institution you probably didn’t expect to see on this show: Vatican City. In this episode, Nicole dives into the financial story of the Catholic Church under Pope Francis: the scandals, the reforms, the setbacks—and what this means for Pope Leo and the future of the church.
Chapter 1: What is the financial story of Vatican City?
Today, I'm going to pull back the curtain on a financial institution you probably didn't expect to hear on the show, Vatican City, with the new pope, the Sistine Chapel, the Swiss guards, and a surprisingly tangled financial web. Now, you might think of the Vatican as this holy place, and it absolutely is.
But it's also a sovereign city-state with a bank, real estate assets, a pension fund, and a history of financial scandal that would make Wall Street blush. Today, we're going to dive into the financial story of the Catholic Church under Pope Francis, the scandals, the reforms, the setbacks, and what all of this means for the new pope, Pope Leo XIV. Let's rewind back to 2012.
Chapter 2: Why is the Vatican Bank controversial?
This is the year before Pope Francis became pope, and the Vatican was already in the middle of a full-blown credibility crisis. Not just spiritually, but financially. That year, a European financial watchdog known as Moneyball did a first-of-its-kind audit of the Vatican Bank, formerly known as the Institute for the Works of Religion, or IOR for short. and it didn't go that well.
The IOR had more than $8 billion in assets spread across 33,000 accounts. But the big shock wasn't the size. It was the secrecy. The bank had been involved in scandals stretching back decades, including money laundering and shady dealings with everyone from fascists to financiers.
The bank's reputation was so toxic that when Francis became pope in 2013, he even floated the idea of shutting it down entirely. When Francis became pope, the finances of Vatican City were essentially handled by five different departments, which made things very messy. It looked like this. Institution one, the Secretariat of State, which had informal financial oversight.
Chapter 3: How did Pope Francis address financial scandals?
Then number two, the Administration of the Patrimony of the Apostolic See or APSA, essentially the Vatican Central Bank that also managed real estate. So think 5000. thousand historic and luxury properties in Europe.
Chapter 4: What are the financial institutions within Vatican City?
Interestingly, the Vatican is one of the largest landowners in the world, with real estate, including commercial buildings, residential properties and luxury properties spread across Europe, especially in Italy, France, the UK and Switzerland. Institution number three, the prefecture tracked budgets. And then there's the Vatican City State itself.
Institution number four, which brought in tourist cash and sold trinkets like the coins and the stamps. And number five, the IOR, operating entirely independently from the rest. But none of them worked together, and none of them really seemed to want to. This system was opaque, it was inefficient, and it was vulnerable to abuse.
Case in point, by the time Francis took office, several American dioceses had declared bankruptcy under the financial weight of sexual abuse scandals. In other words, the church needed a serious financial come-to-Jesus moment. Sorry, that's the only pun I'll do, I swear. So what did Francis do? Well, he created a brand new office, the Secretariat for the Economy.
Chapter 5: How did Pope Francis reform Vatican finances?
Think of it like the Vatican's new CFO. He appointed Australian Cardinal George Powell to run it, giving him sweeping powers and reporting directly to the Pope himself. Cardinal Powell brought in PwC. It's a huge accounting firm and the first for the Vatican to do an independent audit.
He shut down secret accounts, required that all funds, even off-the-books donations, be included in the budget reporting. And in one year alone, over 3,500 accounts were closed, many linked to Italy's wealthy elite. Francis reorganized the IOR to become less like a shadowy hedge fund and more like a modest credit union for religious orders.
Its investment division was spun off into a new entity, Vatican Asset Management. I'm sure you're wondering, what is in the Vatican's portfolio anyway? And as you might imagine, the Vatican is not particularly forthcoming about their investments, but they say they focus their investments on things that check both ESG boxes and Catholic Church boxes.
So they don't invest in anything related to weapons manufacturing, abortion services, tobacco and fossil fuels. Around the same time Vatican asset management was formed, the IOR's focus narrowed to Catholic clients, dioceses, religious orders, and Vatican employees. Of course, none of this went down smoothly. The old guard did not love giving up their financial fiefdoms.
When the Vatican's deputy secretary of state tried to cancel an external audit in 2016, it signaled internal resistance. Then came the bombshell. Pell was accused of historic sexual abuse in Australia and stepped down in 2017 to face trial. He was later acquitted, but by then the momentum behind the reforms had stalled. Meanwhile, more financial skeletons spilled out of the closet.
In 2021, the Vatican launched the biggest criminal trial in its history. Over a $400 million London real estate deal gone very wrong. Ten defendants were charged, including Cardinal Angelo Baciu, a high-ranking official once close to Francis himself. In 2023, Baciu was convicted of embezzlement. Despite setbacks, there has been progress.
In 2023, Moneyball, the committee that had once heavily criticized the Vatican's finances, gave the Vatican a passing grade for its improvements. In fact, they won't check again until 2028. The IOR has settled into its new leaner role. It posted a modest $34 million net profit in 2023 and now manages $6 billion, $2.3 billion in bonds and $55 million in stocks.
In other words, a very conservative portfolio. But it's not all good upward progress. In fact, the financial situation is still really bad. The Secretariat for the Economy reported a $75 million deficit in 2023. its net assets dropped 6% to $4.6 billion.
And even with the APSA's vast property empire, the Vatican still relied on donations for 45% of its revenue, which isn't exactly a sustainable strategy for a global institution. And then there's the Vatican Pension Fund. The pension fund is for employees of the Vatican City-State and now the Holy See, which is the governing body of the Roman Catholic Church.
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