Pope Francis has taken his boldest step yet to overhaul the Vatican's often murky finances, creating a new department with broad powers to oversee all of its economic and administrative affairs, the Vatican said on Monday.

The Secretariat for the Economy will be headed by Australian Cardinal George Pell, currently the archbishop of Sydney. The pope will also name an auditor with oversight powers.

An advisory panel of eight cardinals advising the pope, including Pell, suggested the new department to the pontiff last week.

An existing economic department known as the Administration of the Patrimony of the Holy See (APSA) and which manages financial holdings and real estate, will formally assume the role of the Vatican's central bank.

The role and structure of the separate Vatican bank, formally known as the Institute for Works of Religion (IOR) and which has been at the centre of scandals for decades, will not change for the time being, a spokesman said.

The Vatican Financial Information Authority (AIF), which was set up in 2011 to monitor the Vatican's adherence to international banking standards, will keep its current role. - Reuters