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The Vatican, with its immense history and religious influence, has a complicated relationship with finance. With increasing skepticism from Catholics around the world, stagnant church membership and financial transparency are possible courses of action that could either revive the church or weaken it.

By Vinze Valeza

Introduction

With over 1.3 billion Catholics across the globe and a past that can be traced back over two millennia, the Catholic Church is one of the most influential institutions in the world and in history. However, Vatican City, the geographic seat of the Catholic Church, has been home to more than just religious relics and cultural sites. The Vatican is at the center of a complex history with money and finance filled with mismanagement, secrecy and reform.

The Balance Sheet: Vatican’s Financial Health

Due to the discrete nature of Vatican finances, most numbers concerning revenue and expenditures of the Holy See — the governing body of the Vatican and the Catholic Church —are only projections based on models and historical data. According to America The Jesuit Review, the Holy See collects revenue in four main ways. Financial income from commercial investments, real estate management and self-generated services (universities, hospitals, etc.) make up the majority of Vatican income, comprising about 65% of the $887 million income projections for 2022. Itemized donations, which can only be used towards a specific cause or department, constitute 24% of the income of 2022. Peter’s Pence, a special type of donation wherein Catholics donate directly to the Pope at a designated time every year, comprise 6% of the income of 2022. Lastly, Tourism and the Institute for Works of Religion, the private bank of the Holy See, bring in the remaining 5%.
Although the Holy See generates a sizable amount of revenue, its expenditures on property maintenance, administration, evangelical missions and other services have created a budget deficit that has persisted for many decades. Surprisingly, this budget deficit shrunk despite the combination of the COVID-19 pandemic virtually halting all tourism to the Vatican and the increasing need for pensions for the aging Vatican workforce, according to the National Catholic Reporter. In 2021, the Vatican Prefect for the Secretariat of the Economy stated the deficit shrunk from 79.2 million euros ($81.67 million) in 2019 to 49.7 million euros ($51.25 million) in 2021. Both Vatican insiders and academics claim that the deficit is of little concern due to the significant amount of reserves the Vatican possesses and its numerous assets.

The Financial Structure of the Vatican

The financial decisions of the Holy See officially rest with the Pope, but most of the day-to-day financing is managed by 4 main parties. The Secretariat for the Economy and the Council for the Economy, or SFE and CFE respectively for short are the most important components of the Vatican’s finances. They oversee and have authority over all economic activity concerning the Holy See. The Secretariat of State, under the direction of the Pope, manages Peter’s Pence. The Institute for the Works of Religion (i.e. the Vatican Bank) is the official bank associated with the Vatican. They oversee 5.2 billion euros ($5.6 billion USD) worth of assets associated with the Pope, Cardinals, Catholic institutions, and other religious entities. Lastly, the Administration of the Patrimony of the Apostolic See is the Vatican’s institutional asset manager. ASPA is tasked with maintaining and supervising the large portfolio of assets the Holy See possesses in Rome and around the globe.

As for the protocol on expenditures and investments, the Pope, with help from the CFE and SFE, creates a set of guidelines that investments and expenditures must follow. When it comes to investments, the Holy See invests a small portion of its revenue in stocks, bonds, and real estate. The stocks and bonds invested in are mostly focused within Italy and the EU; however, their stake within any one company is usually less than 6%. Moreover, the Holy See’s investment strategy is traditionally very conservative which causes most Vatican investments to stay within the EU and the West, a strategy often criticized as it diverts money away from developing nations. Since Pope Francis’ inauguration, the Holy See has instituted several reforms that financially support developing nations.

Fund Mishandling and Reforms

The Vatican has had a history of money mismanagement ever since the Holy See’s inception. Many of these issues stem from the financial illiteracy of much of the Vatican leadership. In order to remedy this, leadership figures within the Vatican often give some of the Holy See’s revenue to funds and endowments with reputation, checks and balances, and other professional structures that guarantee the money is being invested in accordance with the Papal wishes.

However, this remedy is something not always followed. The most recent and notable divergence from this strategy has been the 60 Sloane Avenue sale. Instead of giving money to a reputable fund or endowment, a group of Vatican officials gave 350 million euros ($390 million USD) to Italian broker Raffael Mincione in 2014 to buy a luxury apartment complex in central London. By 2018, the Vatican officials feared they were getting scammed by Mincione and turned to another Italian broker, Gianluigi Torzi, for help to get out of the first deal. However, the Vatican officials were allegedly deceived by Torzi into giving him voting shares for the property. As a response, the Vatican officials offered Torzi 15 million euros ($15.6 million) to retain the property and remove himself from the deal. In July 2022, ASPA sold the property to Bain Capital for 186 million pounds ($223.3 million), a $170 million loss.

Although ASPA claims it didn’t touch Peter’s Pence or itemized donations, many speculate that the funds they did use were partly comprised of funds set aside from previous years’ collections of Peter’s Pence. Thus, with the 60 Sloane Avenue scandal and others like it, many Catholics have called for more transparency, arguing they ought to know where their money goes. As a response, Pope Francis enacted several new reforms that aligned with his goal to rebrand and revive the Catholic Church. First, he stripped the Secretariat of State of control over its own investment funds while establishing a committee to oversee the ethics of its investments. Moreover, he instituted a hardline ethical investment agenda wherein investments are only made into companies that align with Catholic doctrine, barring investments into companies that sell contraception, gambling, weapons and arms, etc. Lastly, Pope Francis enacted a policy within the CFE and SFE that made Vatican financial data more accessible to governmental institutions and anti-fraud organizations, including Moneyval, a European anti-money-laundering watchdog.

Many proponents of Pope Francis’ reforms argue that the reforms will ensure that the billions of dollars worth of Catholic donations won’t be put to waste; however, some believe that the transparency reforms will lead to the discovery of more scandalous activity. Only time will tell if these reforms are enough to rid the Catholic Church of its shady financial past and restore the trust that some Catholics have lost in the church, or if these reforms will reveal more cases of money mismanagement. □