The scene takes place in March 2019, in the medieval-looking tower of the Institute for Works of Religion (IOR). It is here, in this institution nicknamed the Vatican Bank, that a particular request arrives. On the desk of the board of directors of the Bank, that day, a loan application. 150 million euros. The applicant? The Secretariat of State. Installed in the Apostolic Palace, headed by Cardinal Pietro Parolin, the Secretariat of State constitutes both what approaches the Ministry of the Interior and that of Foreign Affairs. It is here that the Vatican’s finances are then managed, and in particular its real estate investments. And it is precisely to cover an investment in a building in London that the Palais sends such a request to the IOR.
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But quickly, the big cashiers tick, according to information from The cross. First for the reason given, more than vague: “Institutional reasons”. Then because for a few years, the consequence of a profound reform initiated in 2014 under the leadership of Pope Francis, the Vatican Bank has theoretically no longer granted any credit. In recent years, the operation and structure of the IOR have been considerably reorganized: for example, nearly 5,000 suspicious accounts were closed there in 2016. But under pressure, the board of directors exceptionally agreed to examine the request. . And asks the Secretary of State to send him documents justifying his request. The start of a standoff that will last for several months.
Because the first documents that arrive at the IOR, four photocopied sheets slipped into an envelope, are far from satisfying the Vatican bankers. They quickly understand that the real estate investment in question in London is based on a series of holding companies stacked on top of each other. There will be several back and forth trips during which the controllers mandated by the IOR will not be able to obtain the necessary documents. One of them, responsible for putting together the file, will even be threatened. This Bank employee will resign a month later.
Refusal to lend money
Over the weeks, the IOR team comes to the conclusion that they do not have enough elements to lend the money. So much so that in June, the Bank ended up refusing the loan request. It’s a first. At the Secretariat of State, the surprise was so great that the leaders of the IOR were immediately summoned for a meeting in the presence of Cardinal Pietro Parolin and the substitute, Bishop Edgar Peña Parra. Tone up. The ecclesiastics, supported by the then president of the Financial Information Authority (AIF), the Vatican’s anti-money laundering agency, the Swiss René Brülhart, accuse the Bank of excessive power. But the bankers hold their position and refuse to lend the money.
In the days that follow, Brülhart will send a letter to the leaders of the IOR to try to force the passage, saying that they do not have the right to refuse a loan. For the Bank, it is the last straw that broke the camel’s back. The pressure is too great, and the leaders of the IOR are taking it upon themselves to warn the Pope. Who will charge, at the very beginning of July, the Vatican justice to investigate the question before making the case himself public in the fall. This was the start of what would later be called the “London affair”. It will bring down, a few months later, in November, the boss of the AIF René Brülhart. It is also to this that we attribute the fall of Cardinal Angelo Becciu, former substitute – and as such patron of the powerful first section, in charge of general affairs of the Catholic Church – in September 2020.
For the Roman Curia, the affair acts as an indicator of practices to be banned. Those of investments made in the greatest opacity, through intermediaries to whom the Vatican entrusts the care of negotiating on its behalf. This is particularly the case with an investment fund, Centurion Global Funds, but also several buildings in London, in which Rome has asked businessmen to invest in its name, but also to raise funds. At sometimes absurdly high rates, up to 7% for sums of several million euros. Last year, after the scandal broke, this same loan was renegotiated by the Vatican, with an interest rate of 0.7%… Ten times less.
In all, the Vatican estimates the total loss at 450 million euros. But according to our information, the management of the IOR advances a much higher figure: since the beginning of the 2010s, the Vatican could have lost between 800 million and 1 billion euros in risky financial or real estate transactions.
“It’s a curse, this affair”
In the British capital, the operation to buy a building in Sloane avenue, for example, is completely disastrous. In the Vatican, the loss is estimated at between 76 and 150 million pounds (between 88 and 174 million euros). The luxury apartments, initially planned, will never be realized due to a building permit problem. The 57 million pounds invested are partly lost. As for the rents, they amount to 4 million pounds per year, instead of the 8 million planned. But the intermediaries pocket 2.5 million euros.
“It’s a curse, this affair”, judge a senior Vatican official. If the smallest state in the world has since decided to liquidate the three problematic buildings as quickly as possible, its leaders, foremost among them the Pope, have also decided to take the bull by the horns. Certainly, Francis was aware of the gravity of the situation, and had strengthened, from 2013, the prerogatives of the financial gendarme of the Vatican, the AIF. He had also initiated a reform of the Bank, and appointed the Australian cardinal George Pell, whose methods of auditing relying on outside consultants, drew him, within the Vatican itself, strong enmities. But it was the London affair that prompted Francis to hand over the keys to the Secretariat for the Economy, in November 2019, to a trusted man, Father Juan Antonio Guerrero Alves, a Spanish Jesuit to whom he entrusted the care of clean up the Curia.
Anti-corruption and transparency
The mission entrusted to this graduate in economics, philosophy and theology can be summed up in two key words: the fight against corruption and transparency. With the forty people of his team, the Jesuit sets up internal rules. Strengthening of financial supervision, collaboration with international financial authorities, creation of a public procurement code, appointment of an auditor responsible for auditing the budgets of the departments, etc.
By the end of 2021, the Secretariat for the Economy is also expected to publish a new arsenal of rules regarding the specific issue of real estate investments. The document is expected to be submitted in the coming weeks to the Economic Council, which brings together cardinals in charge of overseeing financial reforms.
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But the Secretariat for the Economy has another peculiarity from which its strength derives: it does not depend on the Secretariat of State. It is from this independence that the Pope will benefit by ordering on August 25, 2020, between two waves of the Covid epidemic, the transfer of all the management of the 110 million euros administered by the Secretariat of State to the Administration of the patrimony of the apostolic see (Apsa), one of the budget management bodies of the Curia. The Pope leaves to his services until 1is November to make the changes. But, All Saints’ Day arrives and nothing happens.
François, determined not to let his administration play the clock, then summons, four days later, the five main officials concerned by this change: Cardinal Pietro Parolin, but also the substitute Bishop Edgar Peña Parra, the secretary general of the governorate. from Vatican City Bishop Fernando Vergez, the president of the Apsa Bishop Nunzio Galantino, as well as Father Antonio Guerrero Alves. And the Pope urges the bosses of the Secretariat of State to put this transfer into effect before the 1is February. Which will eventually be done, under the aegis of a “ transit and control commission “ specially constituted.
Far beyond imposing new rules, supporters of the reform point out that this is in fact a real “Cultural change” that could take up to a generation. But whose legitimacy is gradually making its way to the Vatican, so much the hypermedia coverage of real estate scandals has often been perceived as an injustice with regard to an administration devoted to the Pope and to the Church. “Secrecy, which was the only rule for a long time, was a management method supposed to protect us from scandals, notes a Vatican source. But the London affair proves that it has led us to the exact opposite. In reality, it is transparency that will save us. “
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