MILAN, Italy -- Italy's Banco Ambrosiano was declared bankrupt today by a civil court in an action that could have far-reaching consequences for the Vatican bank headed by American Archbishop Paul C. Marcinkus.
A three-judge panel declared the bankruptcy after a day of deliberations, ruling that Banco Ambrosiano's $1.51 billion in deposits were not sufficient to cover its obligations.
The bankruptcy ruling was the culmination of a financial scandal that came to light after the bank's president, Roberto Calvi, was found hanged beneath a London bridge June 2.
The bank was placed in receivership Aug. 6 after investigators learned its Latin American subsidiaries had made up to $1.2 billion in questionable loans that the judges said were uncollectible.
Investigators said the loans were made on the strength of so-called 'letters of patronage' written by the president of the super-secret Vatican Bank, Archbishop Marcinkus.
Because of the letters the Vatican is obligated to make up at least some of Ambrosiano's losses.
In an interview Monday, Vatican Secretary of State Cardinal Agostino Casaroli conceded that the Marcinkus letters might obligate the Roman Catholic church to cover part of the bank's non-Italian debt, but not necessarily in full.
'I believe therefore that there are limits to the things that many people believe can be caused by these letters,' Casaroli said.
The Vatican is known to have owned at least 1.5 percent of Ambrosiano's stock, but investigators have said the church's ownership share may be much higher.
Italian newspapers have suggested that at least some of the Latin American companies were owned by the Vatican and that they in turn were re-investing the money back into Ambrosiano stock.
They said the Vatican Bank, known formally as the Institute for Religious Works, had so far refused to cover the debts despite the letters of patronage written by Marcinkus.
Casaroli said the Marcinkus letters might obligate the Vatican to cover the non-Italian debts in part but not necessarily in full.
A consortium of seven Italian banks have stepped in to cover Ambrosiano's operations, but the judges ruled that the funds advanced by the consortium, $387 million only demonstrated the bankruptcy of the Ambrosiano Bank.
