Vatican Bank’s Annual Report Reflects Sound Investment Priorities

By Verghese V Joseph –

In the words of His Holiness Pope Francis, during Evangelii Gaudim, 2013, “Money must serve not rule.”

On Monday, the Institute for Works of Religion (Istituto per le Opere di Religione or IOR), commonly known as the Vatican Bank, announced the publication of the financial statements in its annual report. The Institute’s Board of Superintendence unanimously approved the 2019 Annual Report.

Given its mission, the IOR is different from any other financial services provider. Located in the Vatican City, it employs 100 people and serves 14,996 clients in 112 countries.

The statement from the IOR highlighted “the soundness and strength of IOR financials (capital and liquidity level) and its compliance with international best practices. In line with the indications of His Holiness Pope Francis, the Commission of Cardinals decided again this year for a full distribution of profits.”

The Institute for Works of Religion provides financial services to the Vatican City State and to the Catholic Church worldwide. In its operations, it works to ensure adherence to “the ethical and social principles of Catholic Teaching” in its management and in the “investment policies of its own account” and “those of its clients”.

Key financial data for the Institute in 2019 are the following:

• Euro5.1 billion (Euro 5 billion in 2018) of client assets of which 3.4 billion are assets managed for third parties or under custody;

• Euro 38 million (Euro 17.5 million in 2018), as a net result illustrating the risk-based and faith consistent investment process applied to manage IOR balance sheet;

• Euro 630.3 million of net equity after distribution of profit as at 31 December 2019. In addition, IOR maintains a strong liquidity level with a Liquidity Coverage Ratio LCR of 443% and a Net Stable Funding Ratio NSFR of 1008%.

During the year, the IOR has continued to strengthen its senior management team and increased its investments in IT including those related to the membership of the European SEPA payment platforms.

The Covid-19 Factor

According to Cardinal Santos Abril y Castello who is the President of IOR’s Supervisory Commission of Cardinals, “The last financial year has been marked by significant results. The Institute achieved net profits of 38 million euros, while the profit for the previous year had been approximately 17 million euros. This is an extremely important result considering the trends on the markets and low yields that now characterise them. The sound decisions made by management that never adopted merely the making of short-term profits as a discriminating factor have undoubtedly proved successful.”

“Sadly, the Covid-19 pandemic is spreading and disrupting the lives of human beings, even before the economic and financial markets. The Institute has promptly taken action and introduced all the provisions for adoption of indications and mandatory prerogatives envisaged by legislation dictated by the state of emergency, while however continuing to maintain a high standard of efficiency in providing its professional services,” Cardinal Santos added.

Cardinal Santos hoped that the new world situation will generate a much stronger brotherly feeling and effective care for today’s “rejected,” as Pope Francis had always requested.

Msgr. Battista Mario Salvatore Ricca, the Prelate of IOR, in his assessment said, “IOR’s 2019 annual financial statement shows a very positive result, much better than the previous year’s. While this excellent result is undoubtedly largely due to favourable market variations, it has also be achieved thanks to the skill and ability to grasp the best time for action by the Board of Superintendence that provides overall guidance.”

He concluded in the words of Apostle Paul (1 Timothy, 9-10): “But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition.

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and perceived themselves through with many sorrows.”

In consistent with the Catholic Faith and as per the Holy Father Pope Francis words, “the IOR cannot have maximum possible profit as a primary operating principle, but rather those that are compatible with the rules of morality, consistent efficiency and practices that respect its specific nature and the example to be set by its operation” (extract from His Holiness address to the   Members of the Board of Superintendence on 24 November 2015).

They underline the responsibility the Institute bears in administering its own financial resources and those entrusted to it in accord with Catholic principles and values. The  celebration  of  human  life,  creation  and  human  dignity  are  fundamental  Catholic principles and values that are to guide the Institute’s investment  choices  and  always  prevail over return consideration.

Inspired by the Catholic faith and Mission

Indeed, though it seeks returns in line with those of the reference market, the Institute gives priority to respect for the ethical dimension of its investments, as inspired by the Catholic faith and consistent with its mission.

In selecting its investments, the IOR also considers two other fundamental aspects mentioned by the Holy Father in his Encyclical Letter “Laudato sì” that refers to the theme of “care for our common home”: the social responsibility of businesses and their role in realising a sustainable future. In practice, the Institute excludes investments that violate globally recognised principles concerning human rights, work standards, the fight against corruption and the fight against environmental crimes. IOR systematically monitors compliance with these principles and disinvests from any investment should any negative changes occur for various reasons including corporate or geo-political.

Indeed the mission of the Institute is to serve the Catholic Church in all its forms (Holy See – Related Entities – Religious Orders – Catholic Institutions – Clergy – Accredited Diplomatic Corps – Holy See employees) by holding and administering entrusted assets and providing dedicated payment services worldwide.

In fulfilling this noble task, which the Holy Father has entrusted to the IOR, the Institute ensures high quality for the products and services provided guaranteeing, in its work, full compliance with internal and international standards.

Special attention is paid to regulations concerning the prevention of and fight against money laundering and terrorism financing.

The IOR, therefore, continues its journey as an “instrument” of the new financial and administrative architecture of the Holy See and the Vatican City State.

The 2019 Financial Statements were audited by Mazars, an independent international auditing firm.

The Institute is exclusively located in the sovereign territory of the Vatican City State and is subject to the legislation and regulations in force therein.

It is also supervised and regulated by Italy’s Financial Intelligence Authority (AIF).

Please click here for the annual report.