Pope Leo XIV has repealed a major financial regulation instituted by Pope Francis, and allowed Vatican curial departments to again make use of international banks and investment vehicles for managing Vatican assets.
The decision, issued as a motu proprio signed September 29 but made public Oct 6., repeals a rescript issued by Leo’s predecessor in 2022, in the wake of the reforms of Praedicate evangelium, Francis’ apostolic constitution on the Roman curia.
In the preamble of a text titled Coniuncta cura, Leo wrote that he had decided to repeal the Francis-era reform “having carefully evaluated the recommendations unanimously approved by the Council for the Economy,” the body established by Francis to maintain ultimate oversight of Vatican financial affairs.
Francis’ 2022 rescript was widely understood to be a response to the financial scandals around the Secretariat of State, and to a mounting liquidity crisis at the Vatican. It required that all curial assets, accounts, and investment be brought onshore to Vatican City and placed under APSA, the Vatican’s sovereign asset manager and paymaster, which in turn was required to conduct its business through the Institute for Works of Religion, the Vatican’s sole for-profit commercial financial institution.
Leo’s motu proprio is the first significant public decision by the pope with regard to Vatican finances, and follows the publication last month of an interview in which he played down fears of a financial crisis at the Apostolic See, and insisted he is “not losing sleep” over the Vatican’s financial situation.
After calling for a more positive spin to be put on Vatican finances in an interview last month, Leo’s first major financial directive will strike many as a vote of considerable confidence in curial competence and the Vatican’s financial health. Even though it is not clear what the source of the pope’s optimism is.
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Pope Francis’ 2022 rescript was significant for two reasons.
First, it underlined the urgency with which he demanded that all Vatican entities bring any and all assets, deposits, and investments into Vatican City and under the oversight of APSA, with the intention that all curial finances could be accounted for centrally.
Second, it transferred the bulk of the responsibility for managing almost all non-real estate curial investments from APSA to IOR, widely accepted to be the most efficient, profitable, and transparent financial institution in Vatican City, and the only one subject to international oversight.
The bank also proved the most dogged Vatican institution in the fight against financial corruption — most notably in the fallout of the 2018 London property scandal — amplifying the general impression that Francis was doubling down on curial financial oversight.
But those provisions have now been unwound.
According to the text of Pope Leo’s motu proprio, the 2022 rescript is repealed, essentially ending the requirement that APSA conduct its business through the IOR and explicitly allowing it to “to use financial intermediaries established in other States” when it is deemed “more efficient or convenient.”
While Leo’s motu proprio stops short of ending the legal requirement for curial dicasteries to centralize their asset management under APSA, it effectively ends the requirement for all Vatican funds to be brought on shore.
The move is significant, both because it reopens the door to overseas banking and asset management arrangements which Vatican authorities had previously warned were almost impossible to keep track of, and because it suggests the pope — on advice from the Council for the Economy — does not fear any near-term shortage of liquidity in the Holy See.
“We have to avoid the kinds of bad [investment] choices that were made in recent years,” Leo said in his September interview.
“There was great publicity given to the purchase of this building in London, Sloane Avenue, and how many millions were lost because of that. I think during Francis’ time already, significant steps were taken to put new checks and balances, controls, on what the financial operation would look like, how it would work. There have been some very positive things in that respect, so the results are showing.”
But despite that apparently positive assessment of Francis’ reforms, Vatican observers will note that Leo’s motu proprio this week effectively rolls back a key legal safeguard brought in to prevent another London property scandal.
That investment, orchestrated by the Secretariat of State, involved the senior curial department leveraging assets and funds managed in Switzerland to secure hundreds of millions of euros in high-interest loans from two now-shuttered banks. That money was used to fund overseas investments, which saw the Holy See realize nearly 200 million euros in losses, and led to the conviction of nine people including Cardinal Angelo Becciu, of financial crimes.
It is not clear what advice Pope Leo received from the Council for the Economy which prompted his decision to repeal Francis prohibition on overseas banking and investment operations but, whatever the reason, it represents the removal of one of the key “checks and balances” Leo so recently hailed as showing good results.
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Leo’s decentralizing move also represents a significant shift in papal confidence in APSA, the Holy See’s asset manager.
Francis’ 2022 order that APSA be required to conduct almost all its investment and asset management work through IOR was seen at the time as a pointed snub to the scandal-hit department which, while not implicated in the London property deal, had been involved in several financially problematic and legally questionable deals during Francis’ pontificate.
The Pillar has previously reported that in 2016, confidential Vatican records showed that senior members of the Council for the Economy were warned that financial irregularities at APSA included “a dangerously, highly centralised investment process and opaque portfolio management operation that breed irregularities and represent significant exposure to fraud.”
In that same year, Vatican financial watchdogs, led by Cardinal George Pell, also ordered an “urgent and immediate” investigation into “potentially illegal” banking transactions by APSA.
Even apart from major scandals, APSA has been consistently criticized internally by Vatican financial officials for a lack of effectiveness in generating returns for the Holy See — even while posting headline profits.
“APSA just published their 2024 financial report and for the year they report a positive result of over 60 million euros,” Leo noted in his September interview. “Why are we crying about a crisis?”
But, internally, officials note that those profit notices are not framed within the context of the Holy See’s overall annual consolidated accounts and profit-loss assessment, or the annual structural budget deficit, both of which are believed to far exceed stated profits.
Moreover, officials have for more than a decade warned that bodies like APSA were failing to maximize returns in a way that could provide long-term financial stability for the Holy See.
For example, financial reports released by APSA in 2024 showed the Holy See’s institutional asset manager had recorded profits of 45.9 million euros the previous year. But while the results were widely hailed as a positive return, others pointed out that the same report noted a return of only 35 million euros across the Holy See’s international property portfolio of thousands of units.
Leo, meanwhile, has had several meetings with the head of APSA, Archbishop Giordano Piccinotti, S.D.B. in the last few weeks, and the decision to effectively allow the department to take back control of its own investments suggests the pope has been impressed with the current management.
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Perhaps the most quietly significant signal sent by Leo in his motu proprio this week is that the pope appears to have enough confidence in the Vatican’s liquidity that he is happy for curial money to once again be moved offshore.
That is, again, a striking change of tone from Francis, who last year warned that “the latest in-depth analyses carried out by independent experts indicates a serious prospective imbalance of the [Vatican pension] fund, whose dimension tends to widen over time in the absence of interventions.”
The Pillar has previously reported that the fund’s unfunded liability was estimated at nearly 1.5 billion euros a decade ago, and is believed to have ballooned significantly since.
“In concrete terms, this means that the current system is not able to guarantee in the medium term the fulfillment of the pension obligation for future generations,” Francis said, and that “difficult decisions that will require a particular sensitivity, generosity and willingness to sacrifice on the part of all” would be required.
Francis’ legal requirement that all curial assets be moved onshore to Vatican City were widely understood to be part of an overarching drive to shore up curial finances against a possible liquidity shortage, yet Leo in his interview last month played down the pension black hole and budget deficit, calling it a “universal problem” for governments which could be dealt with, while underlining the need for a more positive public message around Vatican financial affairs.
His decision to re-authorize overseas curial banking and investment management is the clearest practical sign yet that the new pope’s bullishness on Vatican finances isn’t just a matter of messaging, but that Leo is quite literally willing to put the Vatican’s money where his mouth is on the subject.
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While the effects of Leo’s motu proprio are clear enough, the motivations for his decision remain unexplained, beyond the somewhat perfunctory reference to “recommendations unanimously approved by the Council for the Economy, and having consulted persons expert in this matter.”
It is possible that Leo’s move to roll back one for Pope Francis’ less widely appreciated but quietly most dramatic reforms was inspired by unexpectedly positive financial returns in the first months of his pontificate.
It could be that, following the conclave, a wave of donations and promises of future support have poured into the Vatican’s coffers, such that the apocalyptic assessments issued by Franics in the final year of his reign have now been so dramatically reversed that strict investment and onshore liquidity controls are no longer necessary.
Such a result would be dramatic and unheralded indeed. Though it does not tally with the quieter assessments of financial officials within the curia who, at the time of APSA’s most recent profit notice this summer, were quietly cautioning that the overall consolidated statements of the Vatican’s financial situation were still very much in red.
It is also possible, longtime observers of Vatican bureaucratic maneuverings might even say more likely, that Pope Leo has been presented with and persuaded to accept a highly selective version of the curia’s financial situation, one which presents incremental returns as revenue triumphs, and serious budgetary issues as only theoretical problems.
Meanwhile, the more draconian centralizing policies of Francis might be presented as unworkably restrictive, creating bottlenecks in the administrative system and ultimately hampering financial progress, rather than fostering it.
A third possibility — and there could be theoretically endless permutations and combinations of them — is that Leo was persuaded to lift the ban on international curial banking and investment not because things are going well, but precisely because they aren’t going nearly well enough.
Although the IOR has, under its current administration, carved out a reputation for probity, sober policy and reasonable rates of return on its business, it might be the case that this slow and steady approach simply cannot be stretched to meet the Vatican’s short or medium term needs.
Instead, perhaps, Pope Leo has had to permit the curia to get back into the international banking and investment game because, bluntly put, they need to see higher returns faster than the IOR can provide. Ironically, it was exactly that kind of urgency which led to the London financial scandal in the first place.
While unlikely to make international headlines, Coniuncta cura marks the beginning of something. Whether it proves the dawn of a new chapter in Vatican finances under Leo, or just the beginning of a familiar cycle of history about to repeat itself, remains to be seen.
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Leo’s first financial reform: A new dawn or history on repeat? – The Pillar
