Con­cerns raised as Church al­lowed to in­vest in de­riv­a­tives

The Church of England - - News - By our Par­lia­ment Cor­re­spon­dent

NEW LAWS con­firm­ing that the Church Com­mis­sion­ers and Church of Eng­land Pen­sions Board can en­ter into de­riv­a­tive con­tracts have been ap­proved by the House of Lords de­spite some ob­jec­tions from a Con­ser­va­tive peer.

The de­riv­a­tives power was in­cluded in the Church of Eng­land (Miscellaneous Pro­vi­sions) Mea­sure, which in­cluded a string of changes to Church law and in­tro­duced in the Lords by the Bishop of Ox­ford.

Bishop John Pritchard said: “The need for this pro­vi­sion has arisen be­cause in re­cent years both bod­ies have had in­creas­ing dif­fi­culty in per­suad­ing po­ten­tial coun­ter­par­ties that they have the nec­es­sary pow­ers to buy de­riv­a­tives.

“It is im­por­tant to say that nei­ther body pro­poses to spec­u­late in de­riv­a­tives; they wish to use them purely as a way of man­ag­ing risks aris­ing in their in­vest­ments - for ex­am­ple, by hedg­ing against changes in in­ter­est rates. This does not rep­re­sent a shift in in­vest­ment strat­egy but an en­abling of it.”

Con­ser­va­tive peer Lord El­ton pointed to the “cat­a­strophic” re­sults of de­riv­a­tives com­pos­ing “third-rate Amer­i­can mort­gages”.

He said: “It very nearly de­stroyed the whole world’s bank­ing sys­tem and did a great deal of harm to a great many people.

“Those were wise, ex­pe­ri­enced, sen­si­ble people - at least, a large num­ber of them must have been be­cause there were so many.

“It is no re­flec­tion on the fi­nan­cial abil­i­ties of the board, the com­mis­sion and their ad­vis­ers to say that these things can be very dan­ger­ous. It is rather like go­ing into a shop where there is a bas­ket full of toys, but one or two of them are hand grenades. The great dan­ger is that people do not spot the dif­fer­ence.

“Al­though one is re­as­sured by the un­der­tak­ing given in the dis­cus­sion of the Mea­sure be­fore the Ec­cle­si­as­ti­cal Com­mit­tee that the Church’s rep­re­sen­ta­tives will never deal in in­stru­ments that they do not un­der­stand, one must recog­nise that the bankers of the world could have said ex­actly the same thing a week be­fore they ac­tu­ally caused the catas­tro­phe.

“I am say­ing this be­cause, if a mea­sure is pro­posed within the Church of Eng­land to avail it­self of that ex­ten­sion, I hope that this warn­ing shall be read by those do­ing so, so that they will be re­minded of what these things can do and treat them with very great care.”

But Bishop Pritchard told him: “It is as well to be clear what we do at the mo­ment - what the Church Com­mis­sion­ers, for in­stance, are us­ing de­riv­a­tives for.

“They use them for three things: the hedg­ing of for­eign cur­rency, the hedg­ing of in­ter­est rate risks and as a means of tak­ing shares in par­tic­u­lar com­pa­nies - prepa­ra­tion for buy­ing eq­ui­ties them­selves. So they make very limited use of de­riv­a­tives. They are cer­tainly not in the busi­ness of spec­u­la­tion.”

He said there were “rea­son­able safe­guards” and con­trols by the Char­ity Com­mis­sion­ers.

The mea­sure also al­lows for the Lady Mar­garet Pro­fes­sor of Divin­ity at Ox­ford – a post once held by for­mer Arch­bishop of Can­ter­bury Rowan Wil­liams – to be a lay per­son.

Labour peer Lord Wil­liams of Elvel, who is the step­fa­ther of the cur­rent Arch­bishop of Can­ter­bury, said his fa­ther had held the post.

“It has been a distin­guished post in the his­tory of Ox­ford, of Christ Church and of divin­ity and the­ol­ogy,” he said.

“It is, in a way, a sad obit­u­ary for some­thing that was set up and op­er­ated so well in so many the­o­log­i­cal con­texts. It al­lowed pro­fes­sors to de­lib­er­ate and preach in the se­cu­rity of the res­i­dence of Christ Church. It is a pity that it should go. How­ever, there it is. As they say, the car­a­van moves on.”

But he asked what would hap­pen to the “rather at­trac­tive pri­ory house where my fa­ther lives and I was brought up”.

Bishop Pritchard told him the change was a sign that “good the­ol­ogy is now much more broadly spread across the pop­u­la­tion” and was “not just an or­dained pre­serve”.

But he said lay as well as or­dained the­olo­gians could live in the house.

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