Holy Finances and a Financial Hole: the Money Trail of the Vatican

Speaker 1 I live in LA now, but lately I have been craving the seasons. Snow, hot cocoa, the whole thing.

Speaker 1 I don't even ski, but I have been daydreaming about working remotely from somewhere really cozy on the East Coast, like a cute little ski town for a little bit.

Speaker 1 And whenever I know I'm going to be gone for a while, I always remind myself that my home can actually be working for me while I'm away because I host my space on Airbnb.

Speaker 1 It is one of the easiest ways to earn passive income from something you already have, and that extra income feels particularly helpful this time of year as we approach the holidays. holidays.

Speaker 1 A lot of my friends say that sounds amazing, but where do you find the time to manage guests and bookings? And that's when I tell them about Airbnb's co-host network.

Speaker 1 Through Airbnb, you can find a local co-host who can help you set up your listing, handle reservations, communicate with guests, provide on-site support, even help with design and styling.

Speaker 1 I like to give a personal touch when I'm hosting on Airbnb. So I make a list of my favorite restaurants in the area and I hand write a note welcoming my guests to the property.

Speaker 1 My guests love it, but I also know that some of those little personal touches can take a lot of extra time. So this is the exact kind of thing that you would want your co-host to help you with.

Speaker 1 Whether you're traveling for work or chasing the snow or escaping it, or you've got a second place that just sits there empty more often than you'd like, your home doesn't have to just sit there.

Speaker 1 You can make extra money from it without taking on extra work. Find a co-host at airbnb.com slash host.

Speaker 2 Here's one piece of advice that I've given for years. Build an emergency fund.
Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 2 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

Speaker 2 That's why it's so important to choose one that makes savings easy and doesn't nibble away at your hard-earned money with ridiculous fees. Chime understands that every every dollar counts.

Speaker 2 That's why when you set up direct deposit through QIIME, you get access to fee-free features like free overdraft coverage, getting paid up to two days early with direct deposit, and more.

Speaker 2 With qualifying direct deposits, you're eligible for free overdraft up to $200 on debit card purchases and cash withdrawals. To date, QIIME has spotted members over $30 billion.

Speaker 2 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com/slash MNN. Chime feels like progress.

Speaker 3 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bank Bank NA or Stripe Bank NA.
Members of DIC.

Speaker 3 Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 3 Fees apply at out-of-network ATMs, bank ranking, and number of ATMs, according to US News and World Report 2023. Chime, checking account required.

Speaker 2 Here's one piece of advice that I've given for years: build an emergency fund. Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 2 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

Speaker 2 That's why it's so important to choose one that makes savings easy and doesn't nibble away at your hard-earned money with ridiculous fees. QIIME understands that every dollar counts.

Speaker 2 That's why when you set up direct deposit through QIIME, you get access to fee-free features like free overdraft coverage, getting paid up to two days early with direct deposit, and more.

Speaker 2 With qualifying direct deposits, you're eligible for free overdraft up to $200 on debit card purchases and cash withdrawals. To date, CHIME has spotted members over $30 billion.

Speaker 2 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com slash MNN. Chime feels like progress.

Speaker 3 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bankor Bank NA or Stripe Bank NA.

Speaker 3 Members, FDIC, spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 3 Fees apply at out-of-network ATMs, bank ranking, and number of ATMs, according to US News and World Report 2023. Chime checking account required.

Speaker 2 I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand.

Speaker 1 It's time for some money rehab.

Speaker 1 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.

Speaker 1 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.

Speaker 1 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.

Speaker 1 Let's Let's rewind back to 2012. 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.

Speaker 1 That year, a European financial watchdog known as Moneyvol 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.

Speaker 1 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.

Speaker 1 The bank had been involved in scandals stretching back decades, including money laundering and shady dealings with everyone from fascists to financiers.

Speaker 1 The bank's reputation was so toxic that when Francis became Pope in 2013, he even floated the idea of shutting it down entirely.

Speaker 1 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.

Speaker 1 Institution one, the Secretariat of State, which had informal financial oversight.

Speaker 1 Then, number two, the administration of the patrimony of the Apostolic See, or APSA, essentially the Vatican Central Bank that also managed real estate.

Speaker 1 So, think 5,000 historic and luxury properties in Europe.

Speaker 1 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.

Speaker 1 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.

Speaker 1 And number five, the IOR, operating entirely independently from the rest. But none of them worked together, and and none of them really seemed to want to.

Speaker 1 This system was opaque, it was inefficient, and it was vulnerable to abuse.

Speaker 1 Case in point, by the time Francis took office, several American dioceses had declared bankruptcy under the financial weight of sexual abuse scandals.

Speaker 1 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?

Speaker 1 Well, he created a brand new office, the Secretariat for the Economy. Think of it like the Vatican's new CFO.

Speaker 1 He appointed Australian Cardinal George Powell to run it, giving him sweeping powers and reporting directly to the Pope himself.

Speaker 1 Cardinal Powell brought in PwC, it's a huge accounting firm and the first for the Vatican, to do an independent audit.

Speaker 1 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.

Speaker 1 Francis reorganized the IOR to become less like a shadowy hedge fund and more like a modest credit union for religious orders.

Speaker 1 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.

Speaker 1 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.

Speaker 1 Around the same time Vatican asset management was formed, the IOR's focus narrowed to Catholic clients, diocese, religious orders, and Vatican employees. Of course, none of this went down smoothly.

Speaker 1 The old guard did not love giving 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.

Speaker 1 Then came the bombshell. Pell was accused of historic sexual abuse in Australia and stepped down in 2017 to face trial.

Speaker 1 He was later acquitted, but by then, the momentum behind the reforms had stalled. Meanwhile, more financial skeletons spilled out of the closet.

Speaker 1 In 2021, the Vatican launched the biggest criminal trial in its history over a $400 million London real estate deal gone very wrong.

Speaker 1 10 defendants were charged, including Cardinal Angelo Bacciu, a high-ranking official once close to Francis himself. In 2023, Bacciu was convicted of embezzlement.

Speaker 1 Despite setbacks, there has been progress. In 2023, Moneyvolve, the committee that had once heavily criticized the Vatican's finances, gave the Vatican a passing grade for its improvements.

Speaker 1 In fact, they won't check again until 2028. The IOR has settled into its new leaner role.

Speaker 1 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.

Speaker 1 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.

Speaker 1 Its net assets dropped 6% to 4.6 billion.

Speaker 1 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.

Speaker 1 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.

Speaker 1 Despite early audits showing a $2 billion shortfall, little has been done. As of 2022, the fund still faced a $700 million deficit.

Speaker 1 The story of the Vatican's finances under Pope Francis is at its heart the story of a man trying to impose order on chaos.

Speaker 1 He succeeded in making the Vatican Bank more transparent and less scandal-prone. So will Pope Leo be able to finish what Pope Francis started?

Speaker 1 Well, as the first American pope, I sure hope he does us proud. You don't need to be a sovereign city-state to have financial oversight.

Speaker 1 One of the most effective tools you can use is something way simpler, a financial accountability buddy.

Speaker 1 This is someone you trust, maybe a friend, a partner, a mentor, who helps keep you honest and on track with your financial goals.

Speaker 1 You don't need to share every single detail of your bank statements, but regular check-ins, monthly is even great, can help you stay on track and stay motivated to save, stick to a budget, and actually open those statements you've been avoiding.

Speaker 1 You don't need to share every single detail of your bank statements, but regular check-ins, monthly is great, can help you stay motivated to save, stick to a budget, and actually open those statements you've been avoiding.

Speaker 1 Just like the Vatican needed someone looking over its books, we all do better with a little outside perspective and a little pressure not to ghost our finances.

Speaker 2 Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes.
Do you need some money rehab?

Speaker 2 And let's be honest, we all do.

Speaker 2 So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me.

Speaker 2 And follow us on Instagram at MoneyNews and TikTok at Money News Network for exclusive video content. And lastly, thank you.

Speaker 1 No, seriously, thank you.

Speaker 2 Thank you for listening and for investing in yourself, which is the most important investment you can make.