ROME – Though largely stalled on some fronts, the Vatican’s financial reform continues full steam ahead on others, as the Vatican announced Friday it’s joining the Single Euro Payments Area, which allows European consumers, businesses and governments to make financial transactions within Europe as easily as domestic payments.
In a statement released by the Vatican on Friday, René Brülhart, President of the Financial Information Authority, also known as AIF, the Vatican’s financial watchdog authority, defined this as a “very positive sign.”
The new deal, which will take effect next year, means that the Institute for the Works of Religion, also known as the “Vatican Bank” or IOR, has been found transparent and up to the standards of the Single Euro Payments Area.
The IOR will now be recognized as a “domestic bank,” meaning it will receive a European routing number and its own IBAN for wire transfers within the domestic European zones, significantly reducing the cost of each transfer for clients, mostly Catholic institutions and religious orders.
“It helps to facilitate payments and harmonize such services,” the Swiss lawyer appointed by Pope emeritus Benedict XVI said. “Furthermore, it demonstrates the Holy See’s efforts to enhance financial transparency.”
The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union for simplification of bank transfers denominated in Euro, which includes the 28 EU Member States plus others such as Norway, Liechtenstein, Switzerland, Monaco – and, as of March 1, 2019, the Vatican City State/Holy See and Andorra, bringing the total to 36 countries.
A source with knowledge of the situation told Crux on Friday that even though this is a very “technical thing,” it’s also a “structural milestone” with several ramifications, including the fact that the IOR will now be forced to uphold the financial standards of the European Union and become “an adult,” including when it comes to technology.
In addition, the EPC only grants geographical scope with the approval of the European Commission and the Vatican got it, meaning EU analysts believe the reforms put fort by AIF are working.
The IBAN, International Bank Account Number, consists of up to 34 alphanumeric characters starting with a two-letter national code, such as IT for Italy and GB for Britain. The fact that the Vatican will have its own- instead of Italy’s- is seen as a financial emancipation from the neighbor that surrounds it.
Enormous strides have been made in recent years to clean up operations at the Vatican bank, beginning with the creation of AIF under Benedict XVI to exercise due diligence, including flagging suspicious transactions. By now, most illegitimate accounts at the bank have been closed and industry-standard paper trails have been established.
Also of importance is a memorandum of understanding signed in 2013 between AIF and the Financial Information Unit of the Bank of Italy. The message that sent to the financial community was loud and clear: Don’t try parking your assets in the Vatican bank anymore to avoid Italian tax obligations, because they’re going to know.
Furthermore, last year, Italy put the Vatican on its “white list” of states with cooperative financial institutions, and last December Moneyval, the monitoring body of the Council of Europe, issued a mostly positive evaluation of the Vatican’s efforts to make its finances transparent.
Francis continued Benedict’s efforts of cleaning up the Vatican finances, though there have been some false steps along the way. For instance, he created the Vatican’s Secretariat for the Economy, headed by Australian Cardinal George Pell. Yet since last year, Pell is back in his home country facing charges of historical sexual abuse.
In December of last year, Giulio Mattieti, former adjunct director of IOR was fired, without any real explanation given, as was the case with the Vatican’s Auditor General, Italian Libero Milone, who also was fired without any motives stated.
The Vatican bank has an estimated $8 billion in assets. By way of comparison, JP Morgan, the largest bank in the U.S., controls $2.5 trillion in assets.