ROME—The Vatican denounced the use of offshore tax havens and financial instruments such as debt securitizations that are seen as factors behind past financial crises, calling for new regulation that would “neutralize predatory and speculative tendencies.”
The document, which was released jointly by the Vatican’s offices for Catholic doctrine and social justice, echoed past warnings by Pope Francis over the dangers of unbridled capitalism. Catholic social teaching has long criticized the inequities of finance, but Pope Francis has given special emphasis to the theme in his teaching, even deriding money as the “dung of the devil.”
The teaching document, which was personally approved by the pope, suggested that greater regulation of the world’s financial markets was necessary to contain “predatory and speculative” practices and economic inequality.
“Markets, as powerful propellers of the economy, are not capable of governing themselves,” said the document, and lack of oversight gives free rein to fraud and other negative effects including environmental damage. The document was approved by the pope in January but only released Thursday.
“The supranational dimension of the economic system makes it easy to bypass the regulations established by individual countries,” the Vatican said. “The current globalization of the financial system requires a stable, clear and effective coordination among various national regulatory authorities.”
In 2011, during the pontificate of Pope Benedict XVI, the Vatican responded to the then-recent financial crisis by proposing a “global public authority” and a “central world bank” to regulate the international financial system.
Pope Francis has commented often and vehemently on what he calls an “economy of exclusion and inequality” based on the “idolatry of money,” earning criticism from Catholics and others who support free-market policies, who say that the pope has underrated capitalism’s achievements in reducing poverty.
Thursday’s document focused on ethical principles rather than specifics, but did single out for criticism the practice of debt securitization, saying that the risky nature of such products makes them a “ticking time bomb ready sooner or later to explode.”
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The Vatican also denounced credit default swaps as “gambling on the failure of others, which is unacceptable from an ethical point of view…a kind of economic cannibalism.”
A section of the document was dedicated to criticizing offshore tax havens, which it said contribute to the “creation of economic systems founded on inequality,” by depriving nations of legitimate revenue, and facilitate the “recycling of dirty money” from the “mafia, war booties, etc.”
Since 2010, the Vatican’s Financial Information Authority has monitored its own compliance with international standards on financial crimes, and the Vatican bank has closed thousands of accounts, often when a client’s profile didn’t conform with the bank’s stated mission to serve “works of religion.”
The Council of Europe’s Moneyval committee, which evaluates anti-money-laundering measures, has praised the Vatican’s efforts to combat the issue.
Write to Francis X. Rocca at firstname.lastname@example.org