General description
Actors
In modern times, Catholic clerical finance continues to be conducted through the Vatican Bank (IOR), and many Catholic lay financial players also exist, both in Germany (e.g. Pax-Bank, [3] Liga Bank, [4] Darlehenskasse DKM) or the United States of America (e.g. Catholic Family Federal Credit Union, [5] Holy Rosary Credit Union [6] ). Other Christian community actors exist (e.g. Christian Community Credit Union, [7] Kingdom Bank [8] ).
In France, if the General Union presented ostensibly as a Catholic credit institution, today, social finance (non-religious ethical finance) seems to have completely replaced Christian finance (e.g. Credit coopératif, Caisses de crédit municipal). However, with regard to ethical principles implemented and their historically Catholic origin, many actors of the solidarity finance can be attached to the category of Christian finance ("Catho-compatible players" [9] ).
Financial products
If certain financial transactions were explicitly condemned because they circumvented the prohibition of usury (e.g. Mohatra contract), the operations of contemporary Catholic bank is characterized by their search for solidarity and the distribution of benefits in favor of the poor. [10] For example, Liga Bank offers credit cards whose commissions are donated to charities supporting children.
Principles
As with Islamic finance, Catholic finance claims to supervise banking operations and financial activities with moral principles directly from the interpretation of Christian religious texts (Bible) and from the doctrine of the Roman Catholic Church (Treaty of virtues and vices, Catholic social teaching). Also, since the subprime financial crisis, it was found that the Pontifical Council for Justice and Peace took more often positions on financial matters. In October 2011, someone published a note "Reform of the international financial system with a view toward a general public Authority".
In his book "Catholic Finance" (in French: “Finance catholique”), Dr. Antoine Cuny de la Verryère presents seven principles for a Catholic finance (named "princificats"). Some of them are inspired from the principles of Islamic finance: prohibition of short-termism, prohibition of non-virtuous investment, obligation to give priority to virtuous savings, prohibition of unjust profits, obligation to share profits, obligation of transparency, and obligation of financial exemplary. [11]
Finance refers to monetary resources and to the study and discipline of money, currency, assets and liabilities. As a subject of study, it is related to but distinct from economics, which is the study of the production, distribution, and consumption of goods and services. Based on the scope of financial activities in financial systems, the discipline can be divided into personal, corporate, and public finance.
In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs.
Islamic banking, Islamic finance, or Sharia-compliant finance is banking or financing activity that complies with Sharia and its practical application through the development of Islamic economics. Some of the modes of Islamic finance include mudarabah, wadiah (safekeeping), musharaka, murabahah (cost-plus), and ijarah (leasing).
The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies, and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies. The legislation was signed into law by President Bill Clinton.
Usury is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in excess of the maximum rate that is allowed by law. A loan may be considered usurious because of excessive or abusive interest rates or other factors defined by the laws of a state. Someone who practices usury can be called a usurer, but in modern colloquial English may be called a loan shark. In many historical societies including ancient Christian, Jewish, and Islamic societies, usury meant the charging of interest of any kind, and was considered wrong, or was made illegal. During the Sutra period in India there were laws prohibiting the highest castes from practicing usury. Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam. At times, many states from ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe, as well as the Reformed Churches, regarded the charging of interest at any rate as sinful. Christian religious prohibitions on usury are predicated upon the belief that charging interest on a loan is a sin.
A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage, it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commodities, particularly cloth merchants. Historically, merchant banks' purpose was to facilitate or finance the production and trade of commodities, hence the name "merchant". Few banks today restrict their activities to such a narrow scope.
Financial services are economic services tied to finance provided by financial institutions. Financial services encompass a broad range of service sector activities, especially as concerns financial management and consumer finance.
Crédit Agricole Corporate and Investment Bank, known as Crédit Agricole Indosuez from 1996 to 2004 and as Calyon from 2004 to 2010, is the corporate and investment banking entity of the Crédit Agricole banking and financial services group, based in Montrouge near Paris, France.
Riba is an Arabic word used in Islamic law and roughly translated as "usury": unjust, exploitative gains made in trade or business. Riba is mentioned and condemned in several different verses in the Qur'an. It is also mentioned in many hadith.
Lombard banking refers to the business of Italian moneylenders generally referred to as "Lombards", even though many originated from Northern and Central Italian regions other than Lombardy. The term was often used in a derogatory sense, as Lombard banking was associated with the sin of usury.
The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BC in Assyria, India and Sumer. Later, in ancient Greece and during the Roman Empire, lenders based in temples gave loans, while accepting deposits and performing the change of money. Archaeology from this period in ancient China and India also show evidences of money lending.
The contractus trinus, contractus triplex, or simply triple contract, is a set of contracts used by European bankers and merchants in the Middle Ages, notably by the Fugger family, as a method of circumventing the canon law prohibition of usury.
An ethical bank, also known as a social, alternative, civic, or sustainable bank, is a bank concerned with the social and environmental impacts of its investments and loans. The ethical banking movement includes: ethical investment, impact investment, socially responsible investment, corporate social responsibility, and is also related to such movements as the fair trade movement, ethical consumerism, and social enterprise.
Murabaḥah, murabaḥa, or murâbaḥah was originally a term of fiqh for a sales contract where the buyer and seller agree on the markup (profit) or "cost-plus" price for the item(s) being sold. In recent decades it has become a term for a very common form of Islamic financing, where the price is marked up in exchange for allowing the buyer to pay over time—for example with monthly payments. Murabaha financing is similar to a rent-to-own arrangement in the non-Muslim world, with the intermediary retaining ownership of the item being sold until the loan is paid in full. There are also Islamic investment funds and sukuk that use murabahah contracts.
Vix pervenit is an encyclical, promulgated by Pope Benedict XIV on November 1, 1745, which condemned the practice of charging interest on loans as usury. Because the encyclical was addressed to the bishops of Italy, it is generally not considered ex cathedra. The Holy Office applied the encyclical to the whole of the Roman Catholic Church on July 29, 1836, during the reign of Pope Gregory XVI.
The shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that legally provide services similar to traditional commercial banks but outside normal banking regulations. S&P Global estimates that, at end-2022, shadow banking held about $63 trillion in financial assets in major jurisdictions around the world, representing 78% of global GDP, up from $28 trillion and 68% of global GDP in 2009.
A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that is not legally a bank; it does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include hedge funds, insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment which act as backup facilities should the primary form of intermediation fail."
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Islamic finance products, services and contracts are financial products and services and related contracts that conform with Sharia. Islamic banking and finance has its own products and services that differ from conventional banking. These include Mudharabah, Wadiah (safekeeping), Musharakah, Murabahah, Ijar (leasing), Hawala, Takaful, and Sukuk.
Sharia and securities trading is the impact of conventional financial markets activity for those following the islamic religion and particularly sharia law. Sharia practices ban riba and involvement in haram. It also forbids gambling (maisir) and excessive risk. This, however has not stopped some in Islamic finance industry from using some of these instruments and activities, but their permissibility is a subject of "heated debate" within the religion.
