Former Secretary of State, Cardinal Tarcisio Bertone was among four cardinals axed at the five-person committee, inherited from Benedict XVI, who last February became the first pope in almost 600 years to abdicate amid controversy in the church.
The move is widely seen as an attempt to clean up the shamed bank, which is still under investigation by Italian authorities for money laundering.
"This is an important turn in the political economy of the Vatican. It is following the new political line of Pope Francis towards transparent for Vatican finance," Professor Giuseppe Di Taranto, economist at LUISS University in Rome, told CNBC in a phone interview.
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Toronto Cardinal Christopher Collins and Vienna Cardinal Christoph Schoenborn are among the new appointees to the commission and have had extensive experience in financial affairs.
The Vatican's new secretary of state, Archbishop Pietro Parolin, who is set to become a cardinal next month, and Spanish Archpriest Santos Abril y Castillo are the final two recruits.
Only French Cardinal Jean-Louis Tauran kept his job.
The reshuffle comes just 11 months into the creation of the overseeing committee, formed last February under Pope Benedict.
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One of the sacked cardinals, Bertone, was blamed for lax oversight that led to a series of embarrassments for the Vatican, including the leaking of the former pope's personal information by his butler.
Closing the bank
Francis has not ruled out shutting down the bank, formally known as the Institute for Works of Religion (IOR), if it cannot be reformed.
The overseeing committee responsible for looking at the bank's strategy is the first step in the reform process, and Francis is keen to bring the bank in line with his image of austerity and modesty.
"Just in the European Union alone, you have millions of people living in poverty or struggling with finance. Making Vatican Bank more transparent is a way to talk and connect to these people," Di Taranto said.
German lawyer Ernst von Freyberg was appointed as president of the IOR in February and for the first time in the bank's history, it published its accounts in October to create more transparency and trust in the institution.
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His team has been credited with bringing improved accountability to the bank.
But the bank has had a troubled history. Monsignor Nunzio Scarano, a former senior accountant in the department headed by Cardinal Domenico Calcagno, is on trial in an alleged plot to smuggle 20 million euros in cash into Italy from Switzerland. Calcagno was among those dismissed from the bank.
In July, the director of the Vatican Bank, Paolo Cipriani, and deputy Massimo Tulli resigned in the wake of this scandal.
An Italian investigation into alleged money laundering at the bank is also still in progress. The bank denies the accusations.
-By CNBC's Arjun Kharpal. Follow him on Twitter @ArjunKharpal.