JP Morgan is shutting the Vatican bank's account with an Italian branch of the US bank due to concerns about a lack of transparency at the Holy See's financial institution, according to media reports.

The decision by the US bank will hurt the headquarters of the Roman Catholic Church in its ability to be ranked in a “white list” of jurisdictions regarded as complying with standards outlawing tax evasion.

The move has come a few weeks after the US State Department listed the Vatican as being potentially vulnerable to money laundering, highlighting the scale of concerns about alleged activities in the tiny jurisdiction.

The Vatican’s bank is called the Institute for Works of Religion. According to Reuters, it enforced reforms last year to win regulatory approval in Europe and draw a line under a number of scandals involving claims of money laundering and fraud.

Italy's leading financial daily Il Sole 24 Ore reported at the weekend that JP Morgan Chase in Milan had told the IOR of the closing of its account in a letter on 15 February. IOR’s account would gradually be phased out starting on 16 March and closed on 30 March.

JP Morgan and the Vatican have reportedly declined to comment.