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

If you take only one thing away from today's episode, Money Rehabbers, let it be this.

In my not-so-humble opinion, Public is the best brokerage for investing in bonds, stocks, ETFs, options, and even crypto. You can try it out for yourself and see why I love it so much at public.com slash money rehab.
Public is legit the only platform I use to buy bonds. Before Public, I used to buy government bonds the hard way.
Slow websites, confusing interfaces, website designs straight out of the early 2000s. Just picture where fun goes to die.
That was it. And then I found Public about five years ago, and I have not looked back.
I can now finally buy bonds without wanting to rip my hair out. Public makes it so easy to buy bonds.
Whether you're into treasuries or corporate bonds, you can browse thousands of options right from your phone. But like I said, public isn't just all about bonds.
You can also find stocks and ETFs, and they offer a high-yield cash account with a 4.1% APY, which is higher than the national average. They even have retirement accounts.
You can now open a traditional or Roth IRA or both right on public. So your future self covered.
And for a limited time, you can earn a 1% match on all your IRA deposits, IRA transfers, and 401k rollovers. If you want an investing experience that's both smart and simple, head to public.com slash money rehab.
One more time, public.com slash money rehab. This is a paid endorsement for public investing.
Full disclosures and conditions can be found in the podcast description. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand.
It's time for some money rehab. 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.
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. 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.
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.
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. 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. The bank had been involved in scandals stretching back decades, including money laundering and shady dealings with everyone from fascists to financiers.
The bank's reputation was so toxic that when Francis became Pope in 2013, he even floated the idea of shutting it down entirely. 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. Institution one, the Secretariat of State, which had informal financial oversight.
Then number two, the administration of the patrimony of the Apostolic Sea, or APSA, essentially the Vatican Central Bank that also managed real estate. So think 5,000 historic and luxury properties in Europe.
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. 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. And number five, the IOR, operating entirely independently from the rest.
But none of them worked together, and none of them really seemed to want to. This system was opaque, it was inefficient, and it was vulnerable to abuse.
Case in point, by the time Francis took office, several American dioceses had declared bankruptcy under the financial weight of sexual abuse scandals. 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? Well, he created a brand new office, the Secretariat for the Economy.
Think of it like the Vatican's new CFO. He appointed Australian Cardinal George Powell to run it, giving him sweeping powers and reporting directly to the Pope himself.

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

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. Francis reorganized the IOR to become less like a shadowy hedge fund and more like a modest credit union for religious orders.
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.
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.
Around the same time Vatican asset management was formed, the IORs focused narrow to Catholic clients, dioceses, religious orders, and Vatican employees. Of course, none of this went down smoothly.
The old guard did not love 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.
Then came the bombshell. Pell was accused of historic sexual abuse in Australia and stepped down in 2017 to face trial.
He was later acquitted, but by then, the momentum behind the reforms had stalled. Meanwhile, more financial skeletons spilled out of the closet.
In 2021, the Vatican launched the biggest criminal trial in its history, over a $400 million London real estate deal gone very wrong. defendants were charged, including Cardinal Angelo Bacchou, a high-ranking official once close to Francis himself.
In 2023, Bacchou was convicted of embezzlement. Despite setbacks, there has been progress.
In 2023, MoneyVol, the committee that had once heavily criticized the Vatican's finances, gave the Vatican a passing grade for its improvements. In fact, they won't check again until 2028.
The IOR has settled into its new leaner role. 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. 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.
Its net assets dropped 6% to $4.6 billion. 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.
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.
Despite early audits showing a $2 billion shortfall, little has been done. As of 2022, the fund still faced a $700 million deficit.
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. 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? 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.
One of the most effective tools you can use is something way simpler, a financial accountability buddy. This is trust maybe a friend a partner a mentor who helps keep you honest and on track with your financial goals 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.

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. 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.
Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some Money Rehab? And let's be honest, we all do. 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.

And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content.

And lastly, thank you. No, seriously, thank you.