The Archbishop of Canterbury said he was irritated and embarrassed after it emerged that the Church of England helped to fund the payday lender he wanted to drive out of business.
The Most Rev Justin Welby suggested a comprehensive review of the Church's investment portfolio could follow, after he expressed his unease over its ties to short-term, high-cost credit firm Wonga.
Speaking on BBC Radio 4's Today programme, he said: "I was irritated for a few minutes but, you know, these things happen. I understand the business, it's an incredibly complex business."
Although the amount of Church money indirectly invested in Wonga was £75,000, out of investments totalling £5.2 billion, it has proved embarrassing for the archbishop, who had spoken out against the payday lending industry. He said: "Now, it shouldn't happen, it's very embarrassing, but these things do happen. We have to find out why and make sure it doesn't happen again."
The archbishop proceeded to heap praise on Wonga and its management, appearing to distance himself from comments he had made to Wonga the day before, saying he wanted to "compete it out of existence".
He said: "Funnily enough, I never took on Wonga in particular. The context was talking about the entire payday lender movement. Wonga is actually a very professionally managed company. Errol Damelin, the chief executive, is a very clever man, runs it extremely well."
He insisted, however, that he was not backtracking from his commitment to clamp down on irresponsible lenders. "We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse."
Mr Welby said that he agreed with Mr Damelin, who in a conversation had warned that over-regulation in the industry could result in driving people towards loan sharks.
"If we try and cap interest rates and drive the legal payday lenders through regulation, people - because they're desperate and there's no consumer choice in a lot of deprived areas - will end up with the loan sharks, which are just a totally different kettle of fish, very much worse," he said. However, Mr Welby said he was unhappy that church funds were being funnelled into Wonga and said he would seek to remedy the situation, before suggesting his powers were limited. "They shouldn't be investing in Wonga. We don't think that's a good thing," he said.
Meanwhile, Wonga has responded to the criticism by firing out a string of adverts today containing 10 "commitments" to help customers. The lender said it has wrongly been tarnished in some quarters as an "unacceptable business" that preys on the vulnerable.