Pope Francis’ sweeping reforms cleaned up some of the mess at the scandal-plagued Vatican Bank, but his management also left its coffers severely depleted. Inside the Holy See’s murky financial future.
Choosing a successor to Pope Francis comes at a critical time for the Catholic Church. There are the obvious hot-button theological divisions —including whether priests should be allowed to marry as well as the church’s views on gay rights and divorce—but Vatican insiders report that religious issues will not be the only ones debated by the 135 cardinals gathering for the upcoming Papal Conclave. Some are also concerned with management expertise and who might make a good Vatican CEO.
That might come as a surprise to those who think of the Holy See only as the home for the world’s 1.4 billion Catholics. And Vatican City is a sovereign nation with diplomatic missions in 183 countries. So while the next Pope needs to be a religious scholar and good communicator, having the skill set of a top CEO might be more necessary now than at any time in the church’s nearly 2000-year history. Or, as National Catholic Reporter columnist Thomas Reese famously put it 12 years ago, when Francis was selected: “In other words, they want Jesus Christ with an MBA.”
The Pope, of course, is a non-hereditary monarch and has more executive powers than any CEO on the planet—and he does not have to answer to a board of directors or shareholders. Francis did more during his tenure than any Pope to push the Holy See to adapt modern financial practices and no longer operate in the shadows, without oversight or checks and balances. Despite all his ambition as a reformer, Francis often had to battle a secret internecine war with Vatican bureaucrats who tried undermining his efforts. Traditionalists who would like to undo Francis’ reforms only need a new pontiff who does not appreciate the historic importance of the changes he instituted. A pope who is not a good CEO could easily reopen the door to the Vatican’s bad old days.
In 2012, a year before Francis became Pope, the European-based Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval), had issued a 241-page report about its historic audit of the scandal-ridden Institute for the Works of Religion (IOR)— commonly known as the Vatican Bank. For the first time in history the public had a look inside at the Holy See’s finances. At the time, the IOR had more than $8 billion in assets across 33,000 accounts. The bank, which had been at the center of multiple scandals since its 1942 creation—everything from profiting from the Nazis to numerous acts of money laundering—would not even be considered a midsized bank by U.S. standards.
In the days after his election, Pope Francis went so far as to declare, “Oh, how I would like a poor Church, and for the poor.”
The Moneyval report noted that the Vatican was not compliant on half of its 45 guidelines. Of the 16 “key and core recommendations,” which the Vatican had to achieve a passing mark on all to qualify for the all-important white list of the Organization for Economic Co-operating and Development (OECD), it failed in seven. And the IOR’s watchdog group, the Financial Intelligence Authority (AIF), also got a failing grade.
When Francis was elected to the Chair of Saint Peter in March 2013, the church was also losing followers in Latin America and Africa, particularly to Pentecostalism. In the early years of his papacy, several American dioceses filed for bankruptcy over the judgments and settlements from sexual abuse cases. As a Jesuit priest from Argentina who was highly skeptical of capitalism, Francis—who took his name from Saint Francis of Assisi, a champion of poverty and austerity—promised to be a reformer, vowing to clean up how the Vatican did business, promising more transparency than any of his predecessors. In the days after his election, Pope Francis went so far as to declare, “Oh, how I would like a poor Church, and for the poor.”
He had inherited a byzantine system in place since the 1960s. The Holy See’s finances were informally overseen by the Secretariat of State, while the Administration of the Patrimony of the Apostolic See (APSA) acts as the Vatican City’s central bank, responsible for real estate holdings and hard assets, which include more than 5,000 historic, residential and commercial properties in Italy, France, Switzerland and the United Kingdom. Those range from Beaux-Arts buildings in the heart of Paris to a two-story unit that’s home to a Bulgari store in London’s posh Mayfair district. There are also countless architectural treasures, including the 14th century Basilica of Saint Anthony in Padua—properties the Church considers to be literally priceless, as it values historical and artistic assets at the symbolic price of 1 euro per property.
Meanwhile, the Prefecture for the Economic Affairs of the Holy See is tasked with managing curial budgets and balance sheets. Then there’s the IOR, which is run separately from the Curia, and the Vatican City State, which takes in revenue from tickets for the Vatican Museums and sales of postage stamps, coins and souvenirs.
The Moneyval report could have served as a blueprint for reforming the IOR, but Francis startled some Vatican Bank insiders by announcing that if fundamental change was not possible, he would consider closing it. He was not even in office for a year before he issued an historic decree establishing a new division, the Secretariat for the Economy. It absorbed most of the responsibilities held by the Secretariat of State, APSA, and the Prefecture, giving it unprecedented authority over Vatican finances and requiring greater transparency. Francis picked one of his closest advisors, Australia’s no-nonsense Cardinal George Pell, as its chief. Pell, answered only to the Pope and to three newly created bodies empowered to inspect the budgets for nearly two dozen curial divisions that had never previously shared information.
With Francis’s backing, Pell ordered that any funds a Vatican department received from outside sources must be listed in its balance sheet. That put an abrupt end to a common practice of hiding big donations from outsiders trying to influence church policies. And for the first time in Vatican history, Francis brought in a professional outside auditor, PricewaterhouseCoopers, to review every account and budget.
In 2014, Francis announced that he would not close the Vatican Bank after all. He decided to completely reorganize it instead. He moved the IOR’s investment work—the bank held $8.2 billion in assets at the time, including $4.6 billion in assets under management—to a new division. He also replaced the IOR’s chief and its directors with a group of Europeans and Americans with extensive experience in private finance and on Wall Street.
“The aim is to become a model of good practice in financial administration,” Cardinal Pell said in 2014. “Along the way, we’re not going to generate any less revenue for the works of the Church.”
The IOR released its annual report for 2013 on the same day as the reorganization. It was further proof that Francis was revamping the way the Vatican did business. About 3,500 IOR accounts had been closed during the previous year, many belonging to Italy’s ultra-rich and political powerbrokers. Francis transferred the IOR’s investment work to a newly created division, Vatican Asset Management.
Francis’ restructuring of the Vatican Bank meant it would be used primarily as a payment service and financial advisor for Catholic charities, religious orders, and Vatican City employees. No longer would the IOR trade in property and stocks.
At a press conference announcing the IOR results, Pell said, “Our ambition is to become something of a model of financial management, rather than the cause for occasional scandal.” He told the Boston Globe, “The ambition is to be boringly successful, to get off the gossip pages. The aim is to become a model of good practice in financial administration. Along the way, we’re not going to generate any less revenue for the works of the Church.”
Francis had expected bureaucratic resistance from departments that faced a drastic reduction in power and influence. Often the opposition went public, as when the Vatican’s Deputy Secretary of State unilaterally tried to cancel an outside audit in 2016 by PricewaterhouseCoopers. Other times the resistance was sub rosa. Pope Francis was such a popular figure with the church’s followers that the insiders who wanted to derail his efforts decided to attack Pell. Leaked receipts made front page news in Italy that Pell’s Secretariat was running up lavish expenses while it cut the budgets of others. The Vatican dismissed these reports as “complete fiction.” When that did not work, Pell’s enemies encouraged investigators from an Australian government commission to look into curial gossip that he had not correctly handled clerical sex abuse cases when he was the archbishop of Sydney.
In early 2016, Australian investigators grilled Pell for three nights in a Rome hotel. That investigation emboldened some of the Vatican’s old guard to believe they only had to be patient. In 2017, Francis gave Pell extended leave to return to Australia to clear his name on allegations that he had molested two choir boys in the 1990s. The Secretariat for the Economy never recovered fully after Pell was convicted in 2018 of five counts of child abuse. (An appeals court overturned the convictions in 2020,).
Without the hard-charging Pell as his front man, Francis often seemed to hesitate when confronted with the competing interests of the traditionalists and the reformers. The conservative wing contended that the Holy See’s sovereignty means that Vatican departments are the equivalent of the ministries of any other country—meaning there should be a degree of confidentiality in preparing their budgets.
The Kingdom And The Power: Once one of the most influential figures in the Vatican, Cardinal Giovanni Angelo Becciu was convicted of embezzlement and fraud in 2023. Despite losing the “rights and privileges” of a cardinal, he insists on being a part of the upcoming conclave.
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It was not long after Pell’s conviction that the first hints of a possible financial scandal surfaced again in the Vatican. An internal investigation was launched by the Holy See into rumors of a €350 million London real estate deal (roughly $400 million today) that had gone sour and might include top clerics. In 2021, the Vatican launched the largest criminal trial in its history, one in which the once-untouchable Cardinal Angelo Becciu and nine other defendants—including the Pope’s main lay enforcer of misdeeds at the IOR—were charged with fraud or criminal failure to act to prevent theft, in the loss of $136 million in the London property. That trial lasted more than two years and expanded to include other financial irregularities.
By the time it ended in 2023 with the conviction of Cardinal Becciu for embezzlement and other plea agreements, the original purpose of the trial seemed to have been lost in the tsunami of press coverage that questioned whether the Vatican’s bad money habits were too immense and too ingrained for any one Pope to fix. (Despite losing the “rights and privileges” of a cardinal in 2020, Becciu now insists on being a part of the upcoming conclave.)
But it was not all bad news on the financial front for Francis. Moneyval issued a follow-up report last May in which it noted that the Holy See had made great progress since its first evaluation in 2012, both in combatting the financing of terrorism and preventing money laundering. The measures put in place by Francis at the Vatican Bank were deemed so effective that Moneyval will not check again until 2028.
Then last month, while the Pope was hospitalized for double pneumonia, the Vatican issued a decree establishing the Commission for Donations for the Holy See. Consisting of a president and four members, it was Francis’ attempt to offset the growing costs of operating the Vatican by increasing charitable donations from ordinary Catholics and large private institutions.
Reliance on tourism and charity is not a very dependable way to run a government—the Vatican raised ticket prices for the Vatican Museums by 18% to 20 euros last year and drew some 6.8 million tourists—but it is the system that the Holy See has used for a century and it is the one that Francis’ successor will inherit. One thing Francis proved is that charisma and likeability matter when it comes to donations. Contributions to Peter’s Pence—a fundraising arm implemented a thousand years earlier by the Saxons in England, by which ordinary Catholics make contributions to support the Pope—soared after Francis succeeded the more dour Pope Benedict XVI.
In 2023, Peter’s Pence pulled in $57 million, including $53 million from donations—but it spent $121 million, with the excess paid for by funds from its patrimony. Nearly 90% of it went to Vatican operating expenses.
The next Pope, meanwhile, will face a host of financial challenges as Francis’ reforms remain unfinished. There is still infighting between divisions inside the Holy See, and not all the Vatican’s finances are transparent. The Secretariat for the Economy, which includes APSA but not the IOR or the Vatican City State, reported in 2023 that it had a budget deficit of $75 million, and its net assets had decreased by 6% to $4.6 billion. More than half of those come from APSA, its property arm, which recorded $3 billion in net assets in 2023. Despite the profits brought in by its real estate holdings, the Secretariat still relied on external donations for 45% of its income, plus a small contribution from the Vatican City State—an entity that doesn’t publish annual reports or record the tiny country’s gross domestic product.
The IOR, for its part, now manages money only for religious orders, the Roman Curia, dioceses, cardinals, foundations, and the Vatican City State and its employees and pensioners. In 2023, it recorded a modest $34 million net profit and managed $6 billion in assets for its Catholic clients. All its investments must be “faith consistent,” following the principles of church social doctrine, sanctity of life, respect for human life and respect for the environment. That calls for a conservative investment strategy, with the IOR investing $2.3 billion in bonds and just $55 million in stocks.
Another topline concern for the next Pope will be the Vatican Pension Fund, which consists of contributions from Vatican employees. Francis had done the first-ever audit a decade ago and discovered it had a €1.5 billion deficit (or about $2 billion today). He proposed measures to address but nothing has been done and it remains in the red. According to its most recent audit in 2022, the pension fund has a deficit of €631 million (or about $700 million). In a letter he wrote to the College of Cardinals in September, Francis exhorted them to make further efforts so that a “‘zero deficit’ is not just a theoretical objective, but an actually achievable goal.’”
And all those goals could change with the next Pope. While cardinals generally fall into two camps when it comes to religious dogma—traditionalists and progressives—the lines are not so clear when it comes to financial management. Even those who run their own dioceses in the black are not familiar with the unique challenges facing a Pope.
Until the next pontiff is selected, the acting pope (the camerlengo) is 77-year-old Cardinal Kevin Farrell, a Dublin-born, naturalized U.S. citizen, who is widely known as the Vatican’s no-nonsense “fixer” for financial affairs. He has a good CEO aptitude but no realistic chance of becoming the next Pontiff. The same is true of most American cardinals, although they are adept at running large and mostly successful dioceses, there is little appetite evidently among the cardinals to allow an American to be at the helm of the church.
Those on the shortlist to succeed Francis range from hardline conservatives, such as Ghana’s Cardinal Peter Turkson to the Philippines’ progressive Cardinal Luis Antonio Tagle. Many in the church, still concerned about losing worshipers in developing nations, think it might be time for the first Pope from either Asia or Africa.
The early betting odds place the Vatican’s 70-year-old Secretary of State, Cardinal Pietro Parolin, as the favorite to be the next Pope, followed by Cardinal Tagle, Italy’s Angelo Scola and Canada’s Marc Quellet. Those who study the Vatican, however, know it is not wise to pay too much attention to all the handicapping. The election of Francis proved that Papal Conclaves are notoriously unpredictable.
Francis’ reign demonstrated that while charisma and a compelling vision for reform, is important, it is just as necessary to have a Pope who is willing to stand firm against the old guard. While the spiritual vision of the next pope will ultimately determine whether he is an effective leader of the Catholic Church, don’t underestimate the importance of him also being a tough, no-nonsense CEO—with one eye on heaven and the other on the bottom line.
—Additional reporting by Giacomo Tognini
