One of the prohibitions that are mentioned in Parashas Behar is the prohibition against taking interest—ribbis. The Torah forbids us from lending (or borrowing) with interest, as the verses state:
“If your brother becomes poor and is are unable to support himself among you, help him, as you would a foreigner and stranger, so they he can continue to live among you. Do not take interest or any profit from him, but fear G-d, so that he may continue to live among you. You must not lend him money at interest or sell them food at a profit. I am Hashem, your G-d, who brought you out of Egypt to give you the land of Canaan and to be your G-d.” (Vayikra 25:35-38)
The prohibition against ribbis is presented by the Torah as part of a general instruction to help the poor: We are to lend them money, and refrain from taking interest—to allow them the benefit of the loan without charging them for it. The Chinuch thus writes that the purpose of the mitzvah is to assist the poor in a way that will not “bite” (as the word neshech) him. Aside from this, commentaries suggest why, even when the borrower is wealthy and the loan is for business, the prohibition applies. Rabbi Shamshon Rafael Hirsch, for instance, writes that the mitzvah of ribbis limits our dominion over our money, as the mitzvos of Shabbos and Shemitah do over other parts of the world.
In the present article, we will discuss a particular aspect of the prohibition, which is especially pertinent today: Its application to banks. Much of the money that is loaned today is loaned by banks or by other lending institutions.
Does the prohibition of ribbis apply to money borrowed from banks (paying interest to banks) and to money lent to banks (receiving interest from banks)? How is this contingent on the question of shareholder status in owning corporate assets? And what is the halacha when the majority of shareholders is non-Jewish, but there is a minority of Jewish shareholders? These questions, among others, are discussed below.
The Torah prohibition against ribbis applies only to fellow Jews. By contrast, concerning a non-Jew, it is certainly permitted to charge (and to pay) interest, and according to some authorities—most notably the Rambam (mitzvah 142)—it is even a mitzvah to charge interest on a loan to a non-Jew (see commentary of Ramban to Torah, Devorim 15:3). One issue is therefore the bank ownership: if the bank is of non-Jewish ownership, then the question of ribbis with respect to the bank does not arise.
Today’s banks, generally speaking, are not privately-owned companies, but are rather limited-liability corporations owned by their shareholders. This raises the question of whether a Jewish-owned bank is considered owned by its Jewish shareholders, or whether, since a limited-liability corporation is an independent legal entity, it follows that even all if shareholders are Jewish it does not make the corporation Jewish-owned, and the ribbis prohibition will not apply.
An important and widely quoted source concerning the matter is a responsum of Rav Yitzchak Aharon Halevi Ettinga (Shut Maharia HaLevi, Vol. 2, 54), one of the leading authorities of late nineteenth century Europe. Shut Maharia, while discussing the question of whether the loan is being given by the shareholders by way of agency (shelichus), concludes that the bank, as a separate entity, is issuing the loan, rather than the shareholders. Coupled with the fact that shareholders and directors accept no personal responsibility for the loan, he concludes that this is not considered a personal loan of the shareholders in any way.
Based on this definition, Rav Ettinga rules that the prohibition against ribbis which applies to Jewish individuals, is not applicable to banks. This responsum is mentioned by Darchei Teshuvah (160:15), and, following this, by virtually all authorities who discuss the subject. The renowned Tchebiner Rov also agreed with the halachic analysis of Maharia, and his opinion is quoted by his disciple, Dayan Padwa, in Shut Cheshev Ha’efod (Vol. 1, no. 62).
Rav Yosef Rosen, the famed Rogatchover, adopts a similar stance in suggesting that a bank is not a person or a personal entity. In his unique words, it is “form” without “substance.” Based on this assumption he rules that it is therefore permitted to borrow from a bank with interest, even if some shareholders are Jewish (Tzafnas Pa’aneach 184).
Yet, the matter of defining shareholding ownership is far from unanimous. Concerning the question of chametz possession over Pesach, the same Shut Maharia HaLevi (Vol. 2, no. 124) states that shareholders have no possession of the company assets, since they cannot do as they please with the assets. This view is strengthened by Yad Shaul (p. 35), who writes that the company is considered a separate legal entity, and therefore there is no individual ownership of shareholders on the chametz.
However, many Poskim do not accept this lenient view, and see shareholders as partners in the assets of a company. This, for instance, is the opinion of Shut Minchas Yitzchak (Vol. 3, no. 1), who defers the ruling, and states that for shares that give the shareholder voting power over company matters, the shareholder is considered an owner of company assets. Based on this position, alongside several proofs that there is no difference between “collective ownership” and “individual ownership” for ribbis purposes, the Minchas Yitzchak rules that the ribbis prohibition applies even to a bank owned by Jewish shareholders.
Additional authorities who write that shareholding is considered ownership include Shut Maharshag (no. 3), Shut Minchas Shlomo (of Rav Shlomo Zalman Auerbach, Vol. 1, no. 28), Shut Iggros Moshe (Yoreh De’ah Vol. 2, no. 62), Shut Chelkas Yaakov (no. 65), among others.
Rav Moshe Feinstein’s Opinion
An additional point that could be a source of leniency concerning banks is the fact of limited liability. Rav Moshe Feinstein (Yoreh De’ah Vol. 2, 62) ruled that a loan with limited liability is not a loan at all, because none of the people involved is personally beholden to pay it back. Therefore, he permitted lending money to a limited liability corporation.
This leniency only applies however when the borrower is a limited liability corporation. Conversely, the lending organization (such as a bank) has a full claim on an individual borrower. As Rav Moshe writes, the prohibition therefore applies.
Rav Yosef Shalom Elyashiv zt”l mentions the ruling of Rav Moshe as being reliable (Kovetz Teshuvos, Vol. 3, 124, 2).
However, the leniency ruled by Rav Moshe is not accepted by Rav Shlomo Zalman Auerbach (see Shut Minchas Shlomo, Vol. 1, no. 28).
Some Poskim have noted that limited liability is not necessarily absolute, and that there is also a possibility of “piercing the corporate veil” and collecting debts from shareholders (see Nesivos Shalom 177:9, no. 32; Divrei Mishpat Vol. 2, p. 376; Vol. 8, p. 150). Rav Moshe adds that it is permitted to loan a private individual with interest, provided there is no full personal liability of the borrower to pay back the loan, but only a given property is designated for repayment.
Partial Jewish Shareholding
What is the halacha concerning a partial Jewish shareholding? The Minchas Yitzchak (Vol. 3, no. 1) writes that even a minority Jewish shareholding is sufficient cause for stringency, which would mean that a heter iska will be required even for non-Jewish banks with a minority Jewish shareholding—a significant stringency for those living outside of Israel.
However, it is possible that one can be lenient for a bank whose majority shareholding is of non-Jews yet, has some Jewish shareholders. This leniency is noted by Shut Maharam Schick (Yoreh De’ah 158), based on the Gemara (Chullin 135a) that exempts partnership with a non-Jew from various Torah restrictions, such as prohibited labor on Shabbos. Just as it is permitted to be a “silent partner” to Shabbos desecration (we consider that the non-Jew performs the prohibited labor for his own benefit), so one may be a “silent partner” in taking interest.
In fact, we already find leniency in this matter in Shut Shoel U’Meishiv (Rabbi Shaul Yosef Natanson, first edition, Vol. 3, no. 31), who writes that when a bank includes both Jewish and non-Jewish investors, there is no prohibition involved in interest-related transactions. His leniency is based on a famous ruling of Rashi, who writes that the ribbis prohibition requires a direct relationship between the borrower and the creditor, and in the absence of a direct relationship (when agency is used—the agency is not valid, because ein shaliach lidvar aveira), the prohibition does not apply (see Mordechai, Bava Metzia no. 338).
However we do not rely on Rashi’s leniency, and forbid ribbis even when the loan is taken by means of agency (see Beis Yosef, Yoreh De’ah 160 and Rema, Yoreh De’ah 160:16). Though the agency is not valid by Torah law, the borrower and lender are aware of each other’s identity, and they therefore form a personal relationship. However, where it is impossible to establish the identity of the lender, or even to know whether he is a Jew or a non-Jew, all opinions concede that there is no personal relationship between borrower and creditor, and it follows that no prohibition applies (this explanation has been suggested by Rabbi Asher Meir).
It is interesting to note how confident Shoel U’Meishiv was in his ruling. In a letter he wrote to Rav Ganzfried, who had prohibited borrowing from a bank in his Kitzur Shulchan Aruch (65:28), he mentioned his trust that the next edition of the Kitzur Shulchan Aruch will permit the transaction. Rav Ganzfried, however, was unmoved, and the next edition retained the original prohibition.
Rav Menashe Klein (Mishneh Halachot Vol. 6, 145) writes concerning this matter: “In relation to a bank or company which has majority non-Jewish ownership, I have already shown that the opinion of most Acharonim is to disagree with the Kitzur Shulchan Aruch and to agree to permit it, provided there is a majority of non-Jews” (see also glosses of Rabbi Akiva Eiger to Shulchan Aruch, Yoreh De’ah 168:9, 21; Erech Shai 169:23)
It should be noted that Rav Moshe Feinstein ruled (Iggros Moshe Even Hoezer 1, 7) that a non-Jewish bank which has some Jewish shareholders does not pose a problem of ribbis since the ability to vote by proxy does not constitute ownership. In the above mentioned responsum Rav Eliashev unequivocally supports Rav Moshe and comments, “The zokein already ruled on this matter,” Thus one does not need to be concerned, if he purchases shares of a large public bank, that he will violate a prohibition of ribbis.
We have seen that there is a range of opinion concerning the halachic status of the ribbis prohibition when one of the parties is a bank, or another limited liability body. Since Poskim dispute whether the prohibition of ribbis remains, it is certainly correct to ensure that one has a heter iska arrangement, and certainly for a bank with a majority Jewish shareholding, and certainly for loans taken from the bank (payment of interest to the bank), for which the specific leniency mentioned by Rav Moshe Feinstein will not apply.
At the same time, the status of loans given and taken by limited liability bodies is certainly less severe than that of private individuals, and we have seen that many authorities are lenient in the matter.