Faithful Investing

Where can a faithful Catholic turn when it’s time to invest without compromising his principles? A German bank.

At a time when a lack of ethical values in banking is blamed for the current economic crisis, some are looking to those institutions that uphold traditional values.

Pax-Bank is one such institution, a German bank founded by Catholic priests in 1917. The institution prides itself on investing its customers' savings with the Church in mind, employing "maximum responsibility and transparency" and excluding investments that "contravene Christian principles."

The bank's Rome representative director, Michael Smyrek, talked about its take on the current crisis and its Catholic client base.

As yours is a Catholic institution, how is it different from others in the banking sector?

Pax-Bank is a German bank oriented to Catholic and Christian items. Of course, our headquarters is in Germany, but we also have another, a representative bank here in Rome. We work in the context of a Catholic bank, but we are also normal like other banks — the only difference is that we are focused on a special clientele.

When you're focused on a special clientele, then you have to accept Catholic rules and what Catholics want to do. Our clientele are congregations, Catholic institutions, Catholic hospitals, and, naturally, in this context, we're very near to their ideas.

What products do you offer to serve those needs?

One of the needs is microfinancing, so we offer microfinance bonds, not all over the world, as the bank is very small, but in special markets.

For our microfinance bond, we are working with a company in the Netherlands and don't sell this here in Rome, but in Germany. We receive money from investors who choose to invest in this bond, and then the money is used for small projects in poor countries, especially in Asia and Africa. The investor gets a return; they receive interest on it at a competitive rate.

Our product, called Liga Pax Cattolico, is a typical equity fund with big companies, but our fund manager also works together with a partner in Milan, called E Capital Partners, to choose the right equities for this fund, ones that are operating in an ethical way.

Could other banks learn from your banking model, in terms of being more ethical?

Yes, because our style of leadership and management is closer to ethical ideas. We have to earn money, that's absolutely clear. It's also clear that we want to better the interest rate in order to survive. In this context, we're working in a normal market atmosphere, but within this normal market atmosphere, we look more to ethical investments. For example, we don't invest in alcohol, in pornography or drugs, and so on.

Could you export your banking innovations to other banks?

In reality, that's difficult, because we are a small bank compared to one like Deutsche Bank, for example. The question for us is how to operate well in the market as a small bank. We could make an effort to bring ideas into the market.

Naturally, when we're working together with congregations, for example, other banks are also our competitors. But in this context, other banks see a difference in our client relationship compared to their bank, and, so then, perhaps, we can influence them towards a better style of investing.

Do you avoid giving out the types of loans that have been the main cause of the current crisis?

My personal feeling is that when I give a client a loan, I want to sleep well at night, knowing that they can pay back the money and also that they are operating a good ethical business to earn their money.

Could a U.S. citizen invest with this bank?

Yes, it's an open market, and, naturally, as an American investor, you can invest in German and European banks. Also, American investors can invest in Liga Pax Cattolico.

Edward Pentin writes
from Rome.