Vatican IOR releases Annual Report for 2015 with roundtable
event
(Vatican Radio) The IOR
– Istituto per le Opere di Religione, or the Vatican Bank, released its Annual
Report for the 2015 fiscal year on Thursday, indicating its commitment to
assisting the Holy Father in his universal mission of pastoral care.
The extended Annual Report
was accompanied by a Press Release detailing the more salient points of
IOR's 2015 activities.
Jean-Baptiste Douville de
Franssu, President of the IOR, and
the Director General,Gian Franco Mammì, participated in a roundtable
event with Vatican Radio and Osservatore Romano to discuss the report.
The full transcription
of the roundtable is below:
Q: Why does the Vatican,
and the Church, need the IOR, and what are the services the IOR offers?
Jean-Baptiste Douville de
Franssu: Let me say how pleased
I am to be here today and to be given the opportunity to report on 2015 which
was a very important year for the IOR, and I am sure with Dr. Mammi we will
have many opportunities in the course of this interview to tell you a little
bit about some of those activities of 2015.
Why does the Vatican and the
Church need the IOR? I think it’s very simple. First of all, we should
remember that the Vatican, being a sovereign state, it has a small economy and
like any sovereign state that has an economy, it needs an institution that we
would refer to traditionally as a financial institution that allows for
transfer of payments to occur and allow the different agents in the economy to
function. So that’s the primary role of IOR.
IOR first and foremost,
offers payments, services to the various institutions and the various
dicasteries of the Holy See here in the Vatican City State. It’s an
historic role, and it’s a very important role that IOR has today. In
addition, IOR has also developed over the years a service that I would qualify
along the line of wealth-management – although it may be a bit of an ambiguous
term given what is it we are talking about.
We certainly help
congregations, dioceses and institutions of the Holy See and the Vatican City
State to manage their assets, to manage their money. We do it in different
ways. I am sure we will have some occasion this afternoon to describe the
different ways, but it’s essentially providing short term interest bearing cash
accounts , or asset management products. That’s essentially the
basis. So two main activities: transfer payment and wealth
management services. And I think fundamentally, the role that it plays
for the Holy See, for the Vatican City State, is one of great importance
because it allows for, again, all the various elements of the economy of the Vatican
to function in addition of course to supporting the Holy Father in his mission.
Q: Can we say that the IOR
today is completely transparent? “Clean” if we can use this term?
And how could the abuses of the past have happened?
Gian Franco Mammì: How was it possible? It is in any case a
community of human beings, and certainly the absence of rules, of a system and
a series of strict norms, permitted this.
I would certainly say that
today the IOR is absolutely “clean”, if we want to use this term. Major work in
reorganising all the clientele has been carried out -- based on regulation that
is very precise today, regulation that has determined well-defined procedures
and rules, with normative and procedural frameworks that are absolutely
effective. We can say that finally a sure defence has been built up, from which
it will be impossible to retreat.
Q: Mr. President, a
question for you related to this issue and you know how it’s important for the
credibility of the Institute. The IOR has been linked to a number of scandals,
and there have been reports of the Mafia using it to launder money. What did
you find in your internal investigations?
Jean-Baptiste Douville de
Franssu: I think first and
foremost, it’s important to remember what are the core values of the institute.
What is the fundamental purpose of the institute and this is really to help the
Holy Father, to help the Church in its work. So most of the points that
you’ve just touched base upon, which are by essence negative, have nothing to
do with IOR. The focus that we have in place over the last few years, and we
have increased it even further since the arrival of Gianfranco Mammi as
Director General, is of course to be as rigorous and clean an institution as we
can.
It is not possible for us to
go into the details of some of the legacy issues facing IOR but in the past,
IOR has been affected by a series of abuses. Some of them have been in the real
estate sector, others have been more in the securities sector. We have taken a
very diligent and thorough approach. We have done a significant amount of work
to understand what has happened and why and to seek justice so that whatever
was taken away from the institute – therefore, away from the Holy Father – is
given back to the Church. I will certainly not comment on one particular case,
but I would say, any financial institution that does not have strong
governance, strong controls, strong discipline and organization, is by essence,
exposed to potential abuse, because you cannot serve two masters, and money is
tempting. So what we have done, certainly, over the last years, is to put in
place a framework that will allow going forward, that some of the things that
may have happened in the past, will never reoccur again. And I want to say that
proportionately, we are not any different from any other financial institution.
Look at big banks and financial institutions around the world. Many of them
have had these sort of problems and they also had to react. So that’s what IOR
has done knowing that integrity is probably expected even more from us. That’s
what IOR will continue to do and certainly, as you were just asking Dr. Mammi a
minute ago, you have today with IOR a financial institution that can hardly be
more transparent and efficient as much as it is now.
In the world of finance, you
can never say never. There is always a risk that an accident happens either
internally or for external resasons. But I think we have now reached at IOR a
level which is as good as any international financial or banking institution
outside in the world.
Q: There have been reports
that IOR has investments in fossil fuel companies. Isn’t that a bit strange
after the publication of Laudato Si'?
Jean-Baptiste Douville de
Franssu: I will take this
question if you don’t mind. I just have a couple of background points to say
before I give you an answer. First of all, currently the percentage of equities
in IOR’s proprietary portfolio is very limited: 1.7%. And in this 1.7% there is
no such company as a company that would go against the teaching of Laudato si'.
The bulk of this portfolio is in fact invested in fixed income. And here,
again, it’s essentially sovereign fixed income. And therefore, we are not
exposed directly to any of those types of companies that you have mentioned. But
that’s not the full answer to your question. Because the full answer to your
question should also look forward: what is going to happen in the future if we
start increasing the level of equity? You know that the markets are very
volatile. It has been over the last twelve months a very difficult period for
financial markets. So at IOR we had reduced very early on (at the end of
2014) the equity portion in our portfolio. But we may reinvest in the
future and build again this equity exposure. And then we will need to put in
place very clear sets of socially responsible investment criteria to ensure
that when we will be reinvesting in equities we do not fall in the category of
stock that would go against the teaching of the Holy Father.
Q: Another question for
you Mr. President. What happened to the plan for a centrally run ‘Vatican Asset
Management’? (VAM)
Jean-Baptiste Douville de
Franssu: Let’s take a step
back. You remember that the Holy Father, Pope Francis had set up a commission
called ‘COSEA’ and he had asked that commission back in August 2013 to provide
him with a certain number of recommendations regarding the administrative and
financial organization of the Holy See. As part of the work at ‘COSEA’ we came
up with such recommendations. A number of them have been put in place. Some
have not yet been put in place and some may never be put in place. That of
course is the decision of the Holy Father.
This concept of Vatican Asset
Management was one of ‘COSEA’ recommendations. So it is completely
separate from ‘IOR’. They’re two separate issues. I have heard comments that
tend to mix the two but this is incorrect.
Q: This year wasn’t
particularly profitable for the IOR. Why not?
Gian Franco Mammì: Firstly, I would not say that it has not been
profitable: it has been compatibly profitable, considering the objective
difficulties of the market, its volatility, and the crises that have occurred,
such as Greece. We can say that, for our part, however, efficient and dignified
work has been done. It will be possible to confirm the numbers on our financial
statements. The profit of this year is compatible with the economic and
political scenario of the time, and also considering that we have just finished
an important transition phase.
Regarding the yield for our
clients, this is something that respects their wishes. This is another
important concept: an absolute formula for the management of our customers’
patrimony or savings does not exist; there exists what our clients ask of us,
also keeping in mind the limits that imposes on us. From the point of view of
the proprietary assets, everything that could be done was done. Profits were
made. And the task of consigning them to the Cardinals’ Commission was
completed. That which we will surely continue to do – and this is the
primary objective – will be to make the IOR system ever more efficient. And
that is what we are already doing both in terms of internal professionalism and
in terms of tools, and technological platforms. Looking to the future, the idea
that moves us is of development, not of survival.
Q: Mr. President, let’s
speak of the future. What still needs to be done in your opinion to change the
reputation the IOR as a place to launder money or hide it from tax authorities?
And what is the future of IOR? Can you give us an idea of the direction of
IOR?
Jean-Baptiste Douville de
Franssu: Thank you for this
important question. I think it’s an important question because we need to
reflect positively on the reality of what IOR is today.
But before I speak about IOR
and the evolution process that we have gone through I want to thank all IOR’s
staff because it has not always been easy for them; these are people who have
suffered from reputational challenges that the Institute has been exposed to.
We have lots of loyal and very hard working people in the Institute who are
proud to do what they do every day, and if it was not for them IOR would
probably not be what it is today So, today is for me an opportunity to
say thank you to all those people for their dedication and their hard work.
It’s impossible to launder
money at IOR. It may have happened in the past as it may have happened in many,
many financial and banking institutions across the world. But once we have very
strict definitions as to which client can have an account at IOR – and we,
under Canon Law, have got a very strict definition – anyone can not just open
an account. The rules are extremely strict and all the team at IOR have been
trained to know, to understand, to respect and follow these rules. Second
– which we are now currently doing – when you are putting in place a certain
number of tax agreements with various countries in the world where your
customers are domiciled, anyone who would be tempted to use an account in an
institution to launder money, the last place he would want to come to is IOR.
So, I hope if anything, in this conversation that we are having with yourselves
and Dr. Mammì, we can start progressing the idea that money laundering is not
something that is impacting IOR in any shape or form and certainly hasn’t now
for a couple of years. We are now a strong institution fighting against money
laundering, ensuring that we know our customer, as well as - again – many
financial institutions around the world do. In addition and at the risk of
repeating myself, we don’t hide information from tax authorities, but rather
seek full transparency regarding client information. You also referred to the
future of IOR, and whether IOR has a clear direction. I’d like to go back
to my earlier statement. We are here to provide two services to the Holy See:
services of transfer payments -- we have done this historically we will
continue to do this -- and second: we provide wealth management – or
gestione patrimoniale – for our clients, and we will continue to do this.
That is very much what the
Holy Father has confirmed, and very much the direction that Gianfranco Mammì,
and myself as the President of the Board, with the support of the Board, are
working towards achieving.
Q: How many accounts have
been closed since 2012 and why have they been closed? Are there accounts still
not closed because they are under investigation? How many?
Gian Franco Mammì: I can confirm that the number of accounts closed
as of 31 December 2015 is 4,935. But here it is necessary to be careful,
because at a first glance it could appear that all the closed accounts (4,935)
were “suspicious” accounts according to AML norms: nothing could be further
from the truth. Suspicious accounts were all reported by the IOR to the competent
Authorities. The closure of thousands of accounts happened primarily for other
reasons: either because the accounts didn’t enter into the new categories of
customers safeguarding the system, or because they were “sleeper” accounts,
that is, inactive for decades, or because they were accounts with tiny amounts
in them. The closure of accounts that are currently “frozen” because they are
being checked by the competent Authorities, will happen as soon as the IOR is
notified of the outcome of the case.
Q: Has the IOR lost
clients? For what reason? The tax agreement with Italy, or the lack of
services, such as Internet banking?
Gian Franco Mammì: In the great majority of cases, the closure of
accounts was decided by the Institute, following a new course being taken with
criteria of greater severity and attention. On the other hand, many other
accounts were opened. But in the case of those customers who decided to close
their accounts, there may have been someone who lost trust, but let’s not
forget that the years we’ve just been through were particularly difficult. It’s
just as true, however, that now we see a return, and we’re particularly satisfied
by that. Our customers have a great relationship of trust with the Institute
and with the people they’ve known for many years. This relationship of trust
hasn’t essentially changed. This remains for us one more stimulus to continue
along the path that’s been drawn out, above all regarding the fiscal questions
and transparency. That only increases the authority of the Institute, and our
customers’ trust in us. I’ll say something more: under this profile, we’ve
probably been able to offer one more service to our customers. The tax
agreement is not a reason for crisis, but rather a strong point for the “new”
IOR.
Jean-Baptiste Douville de
Franssu: If I may I should like
to add something. One should always remember that all our clients have a
choice, they can go and bank somewhere else. So if they come to ‘IOR’ it’s
first and foremost as Gianfranco Mammi has said by ‘fiducia’ (trust) vis à vis
the Holy Father and to help the Catholic Church and the Vatican City State. So
there is a very strong rapport, we share the same values and the same faith and
therefore our duty is even greater vis à vis of those clients. Also, many of
them have been very, very loyal for many, many years. And therefore all the
efforts that we are now undertaking are really with a view to first of all say
thank you to all those clients but also to increase the quality and the
robustness of the services that we are offering them.
Q: How is the
relationship between IOR and the Cardinals’ Commission and is there any
relationship between IOR and the Secretariat for the Economy or between IOR and
the Council for the Economy?
Jean-Baptiste Douville de
Franssu: So maybe to start
with the latter part of your question. There is no relationship between
IOR and the Secretariat for the Economy. We have to provide information however
to the Consiglio per l’Economia on a yearly basis which is effectively what we
will soon be doing -- what his Eminence Cardinal Santos y Abril will be doing
when he informs, through the annual report, the Consiglio of the results of the
institute activities for 2015.
But our reporting line at IOR
is to the Cardinals’ Commission which is the ultimate supervisory body of the
institution. The relationship between the Board of Superintendence and the
Cardinals’ Commission is a good relationship. Of course, we are very
diverse. On the one hand, we have a group of lay people with significant
expertise in financial markets and regulatory matters. And we are here to
bring that expertise and make that expertise available to the institution. On
the other hand, you have the cardinals who bring a different perspective and
whose pastoral role is essential. And we have over the last two years, in
our frequent and various meetings learned to work together and we have built
trust.
And I would like to take this
opportunity to thank their Eminences for their support, the close coordination,
and rapport that we have.
Q: A final question on the
contribution of the Institute to the Holy See, to the activities of the Holy
See…
Gian Franco Mammì: Yes, so, this year too the Institute has given
its profits to the Cardinals’ Commission and, through this Commission, made
sure they are available to the Holy Father, for his pastoral mission. The
novelty this year – and for me it is a great pleasure to be able to communicate
this – is that the contribution has come only from the actual profits, and not
the capital. This is significant not only in purely budgetary terms but also as
a great sign of the strength of the Institute, which has guaranteed its
capitalisation. This is important news, because it is a moment of trust
both for the financial community and for our customers, because not drawing
upon our capital means our work has been carried out in an extremely correct
manner. The question that could arise is this: Why a smaller amount this year?
The answer is very simple: the smaller amount given this year, absolutely
compatible with the general direction of the markets, respects the desire not
to erode the available reserves, and at the same time complies with the mission
of the Institute as indicated in Article 2 of the Statute. The IOR, as a
foundation of canonical and civil Vatican law, has the task above all of
serving its own customers, spread through the world, assuring them contained
costs and efficient services. Profit made is destined for the Cardinals’
Commission, which makes it available to the Holy Father. This is our mission,
and we carried it out.
Jean-Baptiste Douville de
Franssu: I can add also here
that what has just been described is also a demonstration of the evolution of
IOR and the professionalization, the rigor that now exists. All the elements
that Gianfranco Mammì has just put forward, are very important to demonstrate
the way in which we now operate at IOR, within the context of the Statutes. It
reflects the evolution of the governance, of the discipline, of the controls,
and certainly – at the end of the day – the very close cooperation and the
relationship between the Directorate, the Board of Superintendence, and the
Cardinals’ Commission.
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