The Holy See has appointed as new president of the Vatican Bank a German lawyer who is also the chairman of a shipyard that produces warships for Germany.

A commission of cardinals chaired by Cardinal Secretary of State, Tarcisio Bertone, also known as the vice-pope, has chosen Ernst von Freyber, 55, to take the reins of the scandal-dogged bank, officially known as the Institute for Religious Works (IOR).

The nomination was supposed to herald a quieter time for the bank, which has been embroiled in a series of controversies including the sacking of its last president, Ettore Gotti Tedeschi, in May.

Critics were swift out, however, that the choice of von Freyber was at odds with the traditional Vatican practice of steering clear of links with companies that manufacture weapons or contraceptives.

Blohm Voss, the German shipbuilder von Freyberg chairs, is under contract to produce four frigates for the German navy.

Vatican spokesman Fr Federico Lombardi defended the "meticulous and articulate" seven-month search process that led to von Freyberg's selection.

"It doesn't seem honest to me to say he builds warships or he is a warmonger, nor [that it contradicts] Pacem in Terris [Latin for 'peace on earth']," Lombardi said.

"He chairs a shipyard that builds ships all over the world. What you put on a ship doesn't depend upon who makes it.

"He also organises pilgrimages to Lourdes, is a member of the Order of Malta and takes care of the sick, so certainly he is a person with a notable human and Christian sensibility."

The Vatican said the appointment had the "full consent" of Pope Benedict XVI, who shocked Catholics around the world when he announced his intention to resign.

"Mr von Freyberg brings with him a vast experience of financial matters and the financial regulatory process," said the Vatican.

Von Freyberg is to be tasked with cleaning up IOR's murky finances and bringing the bank into compliance with EU anti-money laundering and transparency rules.

His predecessor, Tedeschi, had been entrusted with the same task by Benedict XVI, who created a new financial authority to fight illegal financial activity.

Tedeschi was reportedly forced to step down from his role at the end of a long fight with Bertone that resulted in the new transparency rules being scaled back.