{{unreferenced, date=August 2013
A ''contractum trinius'' was a set of contracts devised by
Europe
Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a subcontinent of Eurasia and it is located entirel ...
an bankers and merchants in the
Middle Ages
In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...
usury
Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich 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 c ...
as a part of Christian finance. At the time, most Christian nations heavily incorporated scripture into their laws, and as such it was illegal for any person to charge
interest
In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...
on a loan of money.
To get around this, a set of three separate contracts were presented to someone seeking a loan: an investment, a sale of profit and an
insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
contract. Each of these contracts were permissible under canon law, but together replicated the effect of an interest-bearing loan.
The way this procedure worked was as follows: The lender would invest a sum equal to the amount of financing required by the borrower for one year. The lender would then purchase insurance for the investment from the borrower, and finally sell to the borrower the right to any profit made over a pre-arranged percentage of the investment. This system replicated the effects of a loan with any interest rate agreed between the two, yet provided protection to the lender against default, while the borrower remained under the protection of the law when it came to collection of the money by threats or force (
loan shark
A loan shark is a person who offers loans at extremely high interest rates, has strict terms of collection upon failure, and generally operates outside the law.
Description
Because loan sharks operate mostly illegally, they cannot reasonably ...
ing).
The Church proved utterly unable to legislate against the ''contractum trinius'', and the idea quickly spread to merchants and bankers across
Christendom
Christendom historically refers to the Christian states, Christian-majority countries and the countries in which Christianity dominates, prevails,SeMerriam-Webster.com : dictionary, "Christendom"/ref> or is culturally or historically intertwine ...
. It was accepted by writers such as
Gabriel Biel
Gabriel Biel (; 1420 to 1425 – 7 December 1495) was a German scholastic philosopher and member of the Canons Regular of the Congregation of Windesheim, who were the clerical counterpart to the Brethren of the Common Life.
Biel was born in Spe ...
; it helped in part to improve public perception of the practice of usury by moneylenders, and ultimately the doctrine was rewritten by the
School of Salamanca
The School of Salamanca ( es, Escuela de Salamanca) is the Renaissance of thought in diverse intellectual areas by Spanish theologians, rooted in the intellectual and pedagogical work of Francisco de Vitoria. From the beginning of the 16th cen ...
, and the ban on interest-bearing loans overturned in many
Protestant
Protestantism is a branch of Christianity that follows the theological tenets of the Protestant Reformation, a movement that began seeking to reform the Catholic Church from within in the 16th century against what its followers perceived to b ...
countries, starting with
England
England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe b ...
by Henry VIII.
Some Muslims are of the view that the present practice of Islamic banking relies on devices similar to the contractum trinius as a means of working around a ban of
riba
The Royal Institute of British Architects (RIBA) is a professional body for architects primarily in the United Kingdom, but also internationally, founded for the advancement of architecture under its royal charter granted in 1837, three supp ...
Round-tripping (finance)
Round-tripping, also known as round-trip transactions or "Lazy Susans", is defined by ''The Wall Street Journal'' as a form of barter that involves a company selling "an unused asset to another company, while at the same time agreeing to buy back t ...
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Substance over form
Substance over form is an accounting principle used "to ensure that financial statements give a complete, relevant, and accurate picture of transactions and events". If an entity practices the 'substance over form' concept, then the financial sta ...
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Islamic finance
Islamic banking, Islamic finance ( ar, مصرفية إسلامية), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic economic ...