Managers of the Church's £5 billion investment portfolio have lent shares, for a fee, to traders who can then make huge profits by betting that the value of the stocks will fall. Such trading in the shares of financial companies has been temporarily banned by the Financial Services Authority after it was blamed for driving down the share price of Halifax Bank of Scotland, which came close to collapse before it was taken over by Lloyds TSB last week.
The Archbishop of York, Dr John Sentamu, described short sellers as "bank robbers and asset strippers" earlier this week, while the Archbishop of Canterbury, Dr Rowan Williams, condemned the "basic unreality" of the global trade in debts.
But it has emerged that "a small number of foreign stocks" belonging to the Church have been lent to short sellers.
Short selling involves traders borrowing shares from their owners, selling them to a third party, then waiting for the price to drop so they can buy the same number of shares at a lower price and return them to the lender. The difference in the two prices is the trader's profit, though the practice is risky, as the trader stands to make a huge loss if the price goes up.
The Anglican Church's shrewd fund managers have achieved an impressive 9.5 per cent average annual return on their assets over the past decade.
Jonathan Bartley, co-director of the social and religious policy group Ekklesia, said: "The archbishops should be extremely careful when attacking city 'bank robbers' for short-selling and speculation.
"Amongst the billions of pounds that the Church currently invests in property and shares are hundreds of millions invested in oil and mining companies.
"The Church has benefited significantly from the speculation that has underpinned rising oil and commodity prices such as gold and copper.
"The Church has substantial share holdings in banks and a stated aim of making an excess profit of 5% each year over and above the rate of inflation, on its investments."
Mr Bartley suggested that the Church of England should invest its money in institutions such as co-operatives, friendly societies and housing associations, and to work for the good of society in return for a slightly lower profit margin.
"The £5 billion in investments that the Church currently holds provides a valuable opportunity for the Church to put its money where its mouth is, and use its wealth for good," he said. "It has substantial financial leverage which it could utilise through alternative investment strategies."
Andrew Brown, Secretary to the Church Commissioners (housed in building as pic'd above), said: "The Commissioners do, through their custodians (JP Morgan), have a small stock lending programme.
"Stock lending is used for a variety of purposes, not simply to cover shorting by hedge funds. We can assure you that the Commissioners' stocks have not been used to facilitate the shorting of financially vulnerable institutions in the US and UK, including HBOS. Nor will this happen."
It has also emerged that the Church set up a currency hedging programme last year, designed to protect the sterling value of assets held by the Commissioners in foreign currency.
The Church denied this amounted to short selling.
The Catholic Church has been similarly shrewd with its investments.
The Holy See's financial statement for 2007 revealed that its financial managers had shifted millions from shares into bonds, cash and gold, helping safeguard it against the credit crunch.
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(Source: TUK)