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What's on the Vatican Bank's balance sheet?
The most secretive bank in the world just released its first annual report
 
Those chalices don't pay for themselves.
Those chalices don't pay for themselves. (REUTERS)

For the first time in its 125-year history, the Institute for Religious Works (IOR), also known as the Vatican Bank, has published an annual earnings report, part of an ongoing push to rehabilitate the bank's shady reputation.

The 100-page report, published on the bank's website, "seeks to contribute to the transparency which the Catholic Church, our customers, our correspondent banks, our authorities, and the public rightfully expect," said IOR President Ernst Von Freyberg in a letter. "To serve the Catholic Church around the world, the Institute needs to be a well-respected member of the global financial community."

The report represents a turnaround for the bank, which just last year Forbes called "the most secret bank in the world." Over the years, the IOR has been accused of much illicit behavior, including money laundering, financing terrorism, and turning a blind eye to non-religious businessmen who opened accounts for purposes of tax evasion.

But in late 2010, Italian authorities seized $30 million from the Vatican Bank and placed the bank's president and chief executive under investigation for an alleged violation of anti-money-laundering rules, compelling the bank to open its books. Pope Benedict XVI soon established the Financial Intelligence Authority to help prevent future shenanigans, and appointed Rene Bruelhart to keep an eye on the bank. In May, Bruelhart made public six incidents of possible money laundering at the bank from the previous year.

In addition, Pope Francis in August set up a commission to investigate the bank once a year and "report back to him personally," says BBC.

So what can be garnered from the IOR's first earning's statement?

"It functions much like any other bank," says Roberto A. Ferdman at Quartz. It has more than 20,000 clients, from which it collected over 12 million euros in fees and commissions. The bank also earned nearly 26 million euros on loans.

The numbers of consequence: The bank holds 4.98 billion euros in assets, mostly money market accounts; 769 million euros in equity funds; 41.3 million euros in gold, coins, and other precious metals; and some prime Italian real estate, inherited in 2012.

Also, net profits for the year nearly quadrupled from the year before, to 86.6 million euros.

The IOR's leap came mostly from "favorable trading results and higher bond values, resulting from the general decrease of interest rates in the financial markets throughout the years," according to the report. The bank invested heavily in Italian, German, and Euribor bonds, the values of which rose in 2012 as interest rates fell across the eurozone, thanks to the easy money policies of central banks.

So is the most secretive bank in the world basically identical to every other global bank, just a bit smaller?

Not quite. Reuters today also disclosed reports that the bank is likely on the verge of closing all embassy accounts, following some unusually large cash deposits and withdrawals in 2011 by the governments of Iran, Iraq, and Indonesia. The bank's watchdog earmarked the transactions after "the embassies' justifications for the transactions were too vague or disproportionate to the amounts," says Reuters.

Closing embassy accounts would represent yet another step for the IOR on its journey toward becoming the bank it describes in the report: "A small, conservatively managed financial institution of the Catholic Church that serves those spreading the Word of God around the world."

 
Carmel Lobello is the business editor at TheWeek.com. Previously, she was an editor at DeathandTaxesMag.com.

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