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(FILE - In this Monday, June 10, 2013 file photo, Ernst von Freyberg, president of the Vatican Bank I.O.R. (Istituto per le Opere Religiose), talks with the Associated Press during an interview at his office in Vatican City. The Vatican bank's much-publicized financial reform has hit a small glitch: The bank told dozens and perhaps hundreds of widows and Vatican pensioners that they had to close their accounts or risk losing access to their money as part of Pope Francis' reform efforts. Only the bank now says these account-holders were targeted as a result of a "technical error" and are being kept on as clients after all, an embarrassing rollback that comes as the Vatican seeks to mend ties with Italian authorities who have long suspected Italians were using the Vatican as an off-shore tax haven, The Associated Press) has learned. Bank President Ernst Von Freyberg penned a letter to these clients Sept. 19, telling them to come to the bank before Nov. 30 to transfer their money out because they no longer fit the criteria of account-holders set by the board. He warned that if they didn't meet the deadline, their money would become subject to the "internal dispositions" of the bank, according to a copy of the letter obtained by AP. (AP Photo/Domenico Stinellis, File)
Vatican bank profits tumble as Pope Francis orders an overhaul
First Published Jul 08 2014 12:41 pm • Last Updated Jul 08 2014 12:41 pm

Vatican City • Profits plunged by more than $100 million at the Vatican bank last year after thousands of accounts were shut down in a radical overhaul of the scandal-scarred institution.

In its 2013 annual report released Tuesday, the bank, officially known as the Institute for Religious Works, said its net profit totaled 2.9 million euros ($3.9 million) last year, a dramatic drop from the 86.6 million euros ($117.8 million) it reported in 2012.

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The bank said the slump was due to extraordinary expenses, losses related to externally managed investment funds and fluctuations in the price of gold.

Losses included a controversial $20.5 million loan granted to a production company owned by a friend of Cardinal Tarcisio Bertone, the former Vatican secretary of state who has faced criticism for mismanagement as the church’s No. 2 official under retired Pope Benedict XVI.

The number of bank customers dropped from 18,900 in 2012 to 17,419 last year and has continued to fall this year. Around 3,000 accounts were closed, including 2,600 that were considered dormant.

In recent years, the bank has faced increasing pressure from European officials and the Bank of Italy to shed its reputation as an offshore haven and to adopt international guidelines designed to prevent money laundering and terrorist financing.

The bank said it has stepped up transparency and moved to restrict account access to Catholic institutions and clerics, Vatican employees and embassies and diplomats accredited to the Holy See in a bid to tighten control.

"I repeatedly said that I would proceed with zero tolerance for any suspicious activity," bank President Ernst von Freyberg said in a statement. "We have carried out our reforms in this spirit."

The bank released the new figures amid speculation that its board will be restructured and von Freyberg will be replaced Wednesday. French businessman Jean-Baptiste de Franssu is expected to succeed von Freyberg; both men are due to attend a news conference with the Vatican’s economic overseer, Australian Cardinal George Pell.

"This is a time of major change in the Holy See, not only for the [bank]," Pell said. "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."


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