congregations and councils ⦠have no information about how much they are allowed to spend or the type of expenditures they are allowed to make. It is estimated that considerable assets are managed by the Secretariat of State that do not appear in any financial statements, and that have not been examined by outside auditors. [By the same token] no transparency exists on the management of the residuals of the Peterâs Pence.
The Risks of Those Ten Billion in Investments
Francis wanted to know more about the management of the immense sums of money held in the vaults, derived from revenue, offerings, and the Peterâs Pence. Were these assets being used to generate income? Where and according to what criteria? Investments represent one of the largest sources of earnings for Vatican accounts: they guarantee interests that can help pay the high expenses of the Curia and facilitate the evangelical action. But the investments were also exposed to extremely high risks that were being uncovered in many departments. Starting with APSA:
Various Vatican institutions manage assets that belong to institutions of the Holy See, for a value of four billion euros, and assets held by third parties, for another six billion, for a total of ten billion euros. Of these, nine are invested in stocks and one in real estate. Major gaps have been identified in governance, in the process of investment and distribution of the same. One example is from the diversification of the financial portfolio of APSA for 1.1 billion euros starting in September 2013. The investments of 60% of the APSA clients are concentrated on four or fewer stocks. Of 60 APSA clients, with a current portfolio of 1.1 billion, 35 are exposed to an extremely high risk in their portfolios, a risk of loss of value due to the lack of diversification.
Another specific example is the concentration of APSA Certificates of Deposit (CDs) at issuing banks. Of 255 million invested, 80% is invested at [a single credit institute], Banca Prossima, creating high exposure to financial risk. APSA is a hybrid entity that conducts too many functions: from the management of holdings to pay service similar to those of a commercial bank, to the emergency cash procurement, to the providing of support services (human resources, information technology, procurement) to other entities of the Holy See.
In the event of a sharp downturn in the market, it was incredibly risky to concentrate as much as 80 percent of investments in a single credit institution or on just a few stocks. There is no explanation in the documents I have seen as to why the prelates of the Curia chose Banca Prossima, but this choice certainly placed the clientâin this case the Vaticanâin a high-risk situation. At APSA, the inspection by the Promontory Financial Group also found 92 dysfunctions connected to various âtypologies of risk.â Here are the most significant:
1. Reputation: some bank accounts identified with suspicious activities [were] handed over to AIF [the internal audit organ];
2. Loss of income: weak procedures for the management of real estate holdings, insufficient performance by the stocks;
3. Holdings management: the Investment Committee is ineffective;
4. Operative level: use of paper orders. Not addressing the risks identified could lead to potential major financial losses for the Holy See, the inability to spot suspicious transactions and to continue to procure liquidity at the Holy See.
Faced with this situation, Francisâs revolution stepped up its pace, moving toward precise goals and following specific strategies: to prevent scandals and an uproar, the cardinals of the old guard were not fired but effectively âput into receivership,â like Versaldi at the Prefecture, with the monitoring oversight of the COSEA coordinator, Vallejo Balda, or Calcagno at APSA, in a kind of protective quarantine.
In the meantime, Francis was preparing his next revolution. The whole
The Risks of Those Ten Billion in Investments
Francis wanted to know more about the management of the immense sums of money held in the vaults, derived from revenue, offerings, and the Peterâs Pence. Were these assets being used to generate income? Where and according to what criteria? Investments represent one of the largest sources of earnings for Vatican accounts: they guarantee interests that can help pay the high expenses of the Curia and facilitate the evangelical action. But the investments were also exposed to extremely high risks that were being uncovered in many departments. Starting with APSA:
Various Vatican institutions manage assets that belong to institutions of the Holy See, for a value of four billion euros, and assets held by third parties, for another six billion, for a total of ten billion euros. Of these, nine are invested in stocks and one in real estate. Major gaps have been identified in governance, in the process of investment and distribution of the same. One example is from the diversification of the financial portfolio of APSA for 1.1 billion euros starting in September 2013. The investments of 60% of the APSA clients are concentrated on four or fewer stocks. Of 60 APSA clients, with a current portfolio of 1.1 billion, 35 are exposed to an extremely high risk in their portfolios, a risk of loss of value due to the lack of diversification.
Another specific example is the concentration of APSA Certificates of Deposit (CDs) at issuing banks. Of 255 million invested, 80% is invested at [a single credit institute], Banca Prossima, creating high exposure to financial risk. APSA is a hybrid entity that conducts too many functions: from the management of holdings to pay service similar to those of a commercial bank, to the emergency cash procurement, to the providing of support services (human resources, information technology, procurement) to other entities of the Holy See.
In the event of a sharp downturn in the market, it was incredibly risky to concentrate as much as 80 percent of investments in a single credit institution or on just a few stocks. There is no explanation in the documents I have seen as to why the prelates of the Curia chose Banca Prossima, but this choice certainly placed the clientâin this case the Vaticanâin a high-risk situation. At APSA, the inspection by the Promontory Financial Group also found 92 dysfunctions connected to various âtypologies of risk.â Here are the most significant:
1. Reputation: some bank accounts identified with suspicious activities [were] handed over to AIF [the internal audit organ];
2. Loss of income: weak procedures for the management of real estate holdings, insufficient performance by the stocks;
3. Holdings management: the Investment Committee is ineffective;
4. Operative level: use of paper orders. Not addressing the risks identified could lead to potential major financial losses for the Holy See, the inability to spot suspicious transactions and to continue to procure liquidity at the Holy See.
Faced with this situation, Francisâs revolution stepped up its pace, moving toward precise goals and following specific strategies: to prevent scandals and an uproar, the cardinals of the old guard were not fired but effectively âput into receivership,â like Versaldi at the Prefecture, with the monitoring oversight of the COSEA coordinator, Vallejo Balda, or Calcagno at APSA, in a kind of protective quarantine.
In the meantime, Francis was preparing his next revolution. The whole
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