The Vatican appointed a devout German lawyer, Ernst von Freyberg, on Friday to head its bank, filling a post left vacant since May when the previous chief was ousted from the scandal-tainted institution.
The appointment, made by a commission of cardinals, was approved by Pope Benedict XVI and is likely one of his last major decisions before he resigns at the end of the month, a move he announced on Monday, stunning Catholics around the world.
Italian magistrates are investigating suspected money laundering at the bank, officially known as the Institute for Works of Religion [IOR], accusations it has denied but which added to its reputation for poor financial transparency and decades of scandals.
A Vatican statement said Mr. Freyberg, Catholic and a member of the Knights of Malta, an elite charitable organisation that has its roots in the crusades, brings"a vast experience of financial matters and the financial regulatory process."
Born in 1958, Freyberg is chair of Hamburg-based shipbuilder Blohm+Voss and is on the advisory board of temporary employment agency Manpower GmbH and of asset management firm Flossbach von Storch AG. He will work at IOR three days a week.
In May, the then president of IOR, Italian Ettore Gotti Tedeschi, was ousted after the bank's board passed a motion of no-confidence, accusing him of neglecting his basic management responsibilities.
The unusually abrupt dismissal, along with the arrest of the pope's butler for stealing confidential papal documents, was the culmination of a leaks scandal that shook the Vatican and weighed on Benedict's papacy.
The Vatican has been trying to shed its image as a suspect financial centre since 1982, when Roberto Calvi, an Italian known as "God's Banker" because of his links to the Vatican, was found hanging from London's Blackfriars Bridge.
In July, a European anti-money laundering committee said the Vatican bank failed to meet all its standards on fighting money laundering, tax evasion and other financial crimes.
The Vatican passed in nine of 16 "key and core" aspects of its financial dealings and is putting into place changes to meet recommendations in the other areas.
But the report found major failings in the running of the bank and called for changed.
Rome magistrates investigating money laundering froze some $33 million that IOR held in an Italian bank in 2010.
The Vatican said at the time that its bank did nothing wrong and was merely transferring its own funds between its own accounts in Italy and Germany. The money was released in June 2011 but the investigation is continuing.