Today’s post will be a general roundup on some banking issues in the marijuana industry.

NPR did a story on marijuana banking featuring one of our banking clients, Salal Credit Union. Salal has been a real ray of hope in Washington’s marijuana industry for those who understand the importance of banking services. It is forward-thinking enough to understand the benefits of the cannabis industry, also extremely careful in following the rules to a T. It can and definitely should serve as an example other banking institutions should follow going forward, making business decisions carefully and deliberately, but also assertively.  

In other, somewhat belated, banking news, Mbank, an Oregon-chartered bank, started doing business in Colorado in late January with plans to taking on cannabis companies as clients, only to pull out a week later. This story intimates that the bank received pressure from the FDIC to stop immediately. Before we jump all over the FDIC, let’s put this into perspective. As the provider of deposit insurance to banks, the FDIC’s role is to make sure that no bank takes on any existential risks. Without the FDIC putting that kind of pressure on banks, we would undoubtedly see many more failed financial institutions, and the price we pay for deposit insurance — yes we do pay for it — would increase significantly. So what did the FDIC not like about this situation? It probably had to do with the fact that the bank was potentially exposing itself to a single volatile industry in a location 1000 miles away from its nearest branch. It should not be a big surprise that the FDIC would see that as problematic. Few banks in this country focus on one industry only because that sort of lack of industry diversity only increases the risk of problems.

We may also be seeing different attitudes developing between the FDIC and the NCUA. The FDIC is the primary deposit insurance provider for state and federally chartered banks, while the NCUA (National Credit Union Administration) is the primary provider of that same insurance for credit unions. We have seen up close that the NCUA is willing to accept its insured institutions having both marijuana business accounts as well as providing adequately secured loans to marijuana businesses. The FDIC, however, to our knowledge, has not publicly signed off on an institution dealing with marijuana businesses. It released a vague memorandum last week encouraging banks not to turn their backs on entire industries, but that memo was more geared to payday lenders and money transmitters than to marijuana growers. Still, it is worth paying attention to whether the FDIC ever clearly approves of one of its banks getting involved in significant amounts of marijuana business, both on the deposit side and on the lending side.

Things are not all rosy on the credit union side, either. Back in December, things were looking good for Fourth Corner Credit Union in Colorado, which had recently received a state charter to start serving the cannabis industry. As Jacob Sullum points out, however, Fourth Corner has yet to receive sign-off from the Federal Reserve. The Federal Reserve does not charter financial institutions or provide them with their insurance, but it does hold the keys to networks that allow for check-cashing, payment processing, etc. And so long as the Federal Reserve ignores Fourth Corner’s request, that credit union will almost certainly remain grounded. What is happening though to Fourth Corner is not exactly usual, as requests to the Federal Reserve for a master account generally clear extremely quickly, while Fourth Corner has been waiting for over three months. The New York Times takes a longer look at the issue, but its takeaway is the same: though banking the marijuana industry is theoretically possible right now, there are still many roadblocks in the way. Our country’s staggering ineptitude in effectively streamlining bank regulations over the last 50 years has led us to this point, where even though the state charter and the NCUA may both say you can bank the industry, you may still be stopped by another governing body.

In the meantime, the lack of banking for the marijuana industry remains one of its biggest problems.

For more on the pressing issue of cannabis banking, check out the following:

  • Thank you for this highly informative article on what is currently occurring with regards to banking services for the cannabis industry. There is truly a need for these services. However, with the distinct, disparate legal perspectives between the state level (Colorado, Washington, Oregon) and the federal level, other options may need to be considered. What those options are, I do not know. However, I do know that all problems have a solution, sometimes multiple solutions.