The discovery by Financial Times journalists undermined Archbishop Justin Welby’s pledge earlier this week ‘to compete Wonga out of business’.

But the Church later confessed that it invested in funds that provide funding for Wonga. Welby told BBC Radio 4’s Today programme that this has been an ’embarrassment’ and that he is calling for a review into where Church funding is invested.

The Church’s pension fund has been investing millions of pounds into Accel Partners, a US private equity group which was a big investor in the launch of Wonga.

Last year the Church placed payday lenders and pawnbrokers on a blacklist of unethical investments it prohibits. Doorstep lending companies were already banned, with the Church floating plans to roll out credit unions across the neediest parts of the country.

Lambeth Palace regards the investment in Accel Partners as a serious inconsistency with its policy of opposing high interest-rate lending.

Welby has asked the commissioners to scour the pension fund’s £5 bn investment portfolio to check for any other inconsistencies.