President of IOR explains publication of first annual report

(Vatican Radio) The Holy See’s Institute for Works of Religion, or Vatican Bank as it’s commonly called, today published the first annual report of its 125 year history. The lengthy report contains a description of business activities from 2012 and the first 8 months of 2013, together with detailed financial statements, including one from the external auditing company KPMG.
To find out more, the head of Vatican Radio’s German programme, Fr Bernd Hagenkord spoke with the President of the IOR, Ernst von Freyberg….

The document you present today is a rather long and complicated document, few will read it, even fewer will understand what it says. Could you explain in a few words what it contains?

“We present the first annual report in 125 years of history of IOR. It contains a description of our business, it contains a summary of 2012 and of the first eight months of 2013, statements from our supervisory board, from the commission of cardinals and from the prelate. And then it contains more than 60 pages of detailed financial statements with a full audit statement from KPMG.”

Do I need to be an accountant to understand these pages?

“You do not have to be an accountant, if you read the introductory letter and the description of our business of 2012 and 2013 you will get a good impression about what the ‘Istituto per le Opere di Religione’ is about.”

Talking about KPMG: You had external auditing, also included in the process of preparing this document …

“The accounts of IOR have been audited for a long time, always by reputable international accounting firms. In 2013 they were audited by KPMG. In itself that is nothing unusual for the Institute, it is unusual that we are ready to publish.”

Are there any new facts? The IOR attracts a lot of suspicion and stories in the media, as recently in the last days. Are there new facts explaining actually is and does?

“For someone who is following us over the last six months there are no new facts about what we do, who our customers are, and what our mission is. What is new are the details. The most surprising thing will be, how unsurprising it is. You see a rather conservatively managed financial institution safeguarding assets, investing in very conservative investments like government bonds and bank deposits. And you will see an institution highly capitalized. At the end of last year our equity ratio was 15% which is way above comparable financial institutions would have.”

The fact of the report is not new, but the publication of it is. That is part of your policy of transparency, isn’t it?

“That is a key element. Since March this year we have embarked on a strategy on three pillars. One is to reach out to the media and engage in a direct and open dialogue, telling the facts as they are in a systematic way. This includes that we now have a spokesperson’s office for the IOR. The second element is to create a website which can serve as an authoritative source on facts about the Institute. The third element is to publish the annual report.”

For whom is the report written? For the media, the normal user, for other banks? 
“First of all we address ourselves to the Church. There are about one billion Catholics in the world, who have a right to know, what this part of the Holy See does. They also have a right to understand how we contribute to the wellbeing of the Church around the world. The second group is our partners, i.e. our correspondent banks who rely on us being a financially sound and well managed business-partner. The third group is – as you rightfully say – the media, financial analysts who may have an interest, and the public at large.”

You are actually going into the accounts, you have talked about that earlier yourself. How is that coming along, the controlling of the accounts and the cleaning of the business of the IOR?

“That is going along well. Since may we employ the Promontory-Group from the U.S. They are reviewing every single account and they are also doing special investigations for us. In addition and together with them we have reviewed our procedures for taking on clients and for dealing with clients to make sure that no money-laundering can happen at the Institute. All three projects have been going according to plan, we do have a new handbook, we do have new procedures, and we are also ready for inspection by third parties.”

This company you employ, Promontory, how important is that for you, personally and for the Institute, to have external help?

“It is necessary for two reasons. The first is that you need someone with state of the art knowledge because he does these processes time and again for different institutions in the world. The second is equally important: It is a hell of a lot of work. We have 20 to 25 people [from Promontory] at any given day doing this work. We would not have these resources in house.”

We media rely on big words, we call it “a new day is dawning”, as I read today in a paper, another paper says it is a “revolution”. In your own words, what is happening right now at the Institute?

“It is another step on the way to create a compliant and transparent institution, for which the Holy Father will then decide later this year or next year in which exact direction he wants to send us.”

And the final question: What will the next step be for you?

“We have gone a long way on transparency and compliance, the next important for step is to look at our service to the client and see how we can improve the products we offer, the services we offer them.”

Thank you for talking to us.

The full report from the Institute for Works of Religion can be found on the website: