* Freyberg appointed in dying days of Benedict's papacy
* Led bank in reform programme, closing of suspect accounts
* Announcement may coincide with release of annual report
By Philip Pullella
VATICAN CITY, July 1 The Vatican bank's chairman is to step down as soon as next week as part of the restructuring of an institution that has been an embarrassment to the Catholic Church for decades, Vatican sources said on Tuesday.
But the sources, who spoke on the condition of anonymity, disagreed over whether Ernst von Freyberg was leaving willingly or whether he was being pushed out over differences within the Vatican about the pace of reform.
Freyberg's departure is expected to be announced in connection with the publication, most likely next week, of the new annual report of the bank, officially known as the Institute for Works of Religion (IOR).
The new statues of the bank are expected to make the chairman's job a full-time, residential position and, according to one source, Freyberg has decided he wants to return to his family in Germany.
"He is at peace with his decision because it is his decision," this source said.
Freyberg was appointed to head the bank in February, 2013 in one of the last decisions made by former Pope Benedict before he resigned at the end of that month.
Under his leadership, the IOR, which has been hit by numerous scandals in the past, closed hundreds of accounts, instituted strict anti-money laundering regulations and launched several investigations into suspicious activities.
Just three months ago, Australian Cardinal George Pell, bought in by Pope Francis to head the Vatican's new department to oversee all its economic activities, said Freyberg was doing "an excellent job".
According to another source, some Vatican officials always saw Freyberg's position as a stop-gap following the spate of scandals at the bank in the closing years of Benedict' papacy.
Now that many of the reforms are in place, according to this source, these officials felt a new chairman should be found as the bank enters a new phase with new statutes.
"Freyberg was called in to clean up the mess and now something different, more stable, is needed," the second source said.
Freyberg was not available to comment on his future. A spokesman for the bank declined to comment, saying merely that there was "an overall structural reform process being considered" by a group of eight cardinals advising Pope Francis.
The group is meeting at the Vatican all this week and is expected to discuss the changes at the bank ahead of a meeting of the pope's economic advisers on Saturday.
Last week the Italian magazine L'Espresso ran a story about tensions between Monsignor Battista Ricca, Pope Francis' personal delegate at the bank and Freyberg.
L'Espresso said Ricca was upset that Freyberg had not kept him fully informed about some of the clean-up operations at the bank.
In particular, L'Espresso said, Freyberg kept Ricca in the dark about moves in 2013 to unwind an operation that began before his arrival and that resulted in a 15 million euro ($20 million) loss for the Vatican bank. (Editing by Louise Ireland)