9 July 2014
Last updated at 00:59
Pope Francis is appointing a cardinal as head a new economic affairs department at the Vatican
The president and four non-executive members of the governing board of the Vatican bank is due to step down, the BBC has learned.
Their move is be announced on Wednesday as part of a restructuring plan for the Catholic Church’s central government.
Pope Francis has sought to stamp out corruption and other abuses at the bank, which handles the Church’s funds.
The news comes after the bank said its profit fell to 2.9m euros (£2.3m) in 2013, down from 86.6m euros in 2012.
Attempts to create a more transparent banking system for the Catholic Church, begun by former Pope Benedict after allegations were made that the Vatican bank had been used by money launderers, will continue under new management.
Balance sheet woes
The Vatican’s precarious financial situation was revealed by the simultaneous publication in Rome of balance sheets for 2013 of the Holy See, of Vatican City state, a separate entity, and of the Vatican bank, known officially as the Institute for Religious Works (IOR).
The IOR moves money around the world to finance Catholic missions and provides banking services for the pope, clergy and religious orders.
The Holy See, the administrative headquarters of the Church, ran up a deficit of 24.2m euros (£19.2m) last year.
However Vatican City state, the tiny sovereign enclave in the heart of Rome, which derives a large part of its income from tickets to the Vatican museums, reported a profit of 32.3m euros (£25.7m).
Vatican bank president Ernst von Freyberg says the bank’s problems have been blown out of proportion
The Vatican bank reported a massive drop in profits from 86.6m euros (£68.8m) in 2012 to only 2.9m euros (£2.3m) in 2013.
This was attributed in part to write-downs of investments made before the bank’s reform programme, started when less vigilance was exercised.
The cost of bringing in American anti-money laundering experts to comb through and vet some 18,000 individual accounts at the Vatican amounted to 7.3m euros (£5.8m).
As a result of this year-long operation, Pope Francis has called to Rome the former head of the Catholic Church in Australia, Cardinal George Pell.
He will head a new economic affairs department at the Vatican, with oversight of all the Vatican’s financial dealings and will report directly to the Pope.
Vatican bank president Ernst von Freyberg, appointed by former Pope Benedict just before his retirement in February 2013, will be replaced by a French businessman, Jean Baptiste Franssu.
The Vatican bank has lost 3,000 of its customers, leaving about 15,000 current accounts still active
In an exclusive interview with the BBC in his Vatican bank office looking out over St Peter’s Square, I asked Mr von Freyberg if he had discovered many skeletons in the cupboards of the IOR during his term of office.
“Only small ones,” he replied. “There is much less to the IOR than people think. We are smaller than most small town savings and loans [banks] in the world and the same is true of our skeletons.”
“Whatever we found is much smaller than you might believe reading up about the Vatican bank in the media,” he added.
According to the IOR website, the total assets of the Vatican bank amount to 5.9 billion euros (£4.7bn).
Under Mr von Freyberg’s management some 3,000 customer relationships have been terminated, leaving about 15,000 current accounts active.