Three Federal Reserve Bank presidents united in a call on April 3, 2019, for clarity on rules for providing financial services to the marijuana industry.
During a panel at the American Bankers Association Summit, the federal executives were asked about how financial institutions are expected to manage conflicting state and federal cannabis laws. All three stressed the need for a resolution to how the growing gap between state and federal marijuana laws has created difficulties for bankers and cannabis businesses alike.
Tom Barkin, CEO of the Federal Reserve Bank of Richmond
Esther George, who runs the Federal Reserve Bank of Kansas City
Raphael Bostic, CEO of the Federal Reserve Bank of Atlanta
“For better or for worse, we're responsible to follow federal law, and so we would very much like to have clarification on this,” said Tom Barkin, president of the Federal Reserve Bank of Richmond, Virginia. “Whatever legislative answer gets us to clarity would be our preferred outcome.”
Esther George, who runs the Federal Reserve Bank of Kansas City, Missouri, added that “the reality on the ground is there are businesses that are considered state-legal around this substance, and the money that is generated from that again, is a challenge for the banks.”
Choosing to service a marijuana business is “not an easy judgment for the banks to make,” she said. “They deem what's the level of risk — how do I apprise for that, how do I manage that? I think that it is particularly challenging for them, so I look forward to that resolution that provides more clarity to the bankers.”
What advice would George offer financial institutions interested in accepting cannabis business accounts?
“Do your homework,” she said. “This is a case where you have to know your customer and you have to weigh the risk of what you're worried about could happen around this.”We have to get reconciliation across federal and state law ultimately to make this work.
“We have to get reconciliation across federal and state law ultimately to make this work. In the meantime, you're going to have some of these challenging situations.”
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, put the situation into starker terms. Existing federal cannabis laws put banks “in an impossible situation because we don't actually have a vote at either level but are asked to sort of navigate in this middle space,” he said.
“There's not really a clear thing for us to say — we can't give anyone 100 percent certainty in terms of how this is going to turn out,” Bostic said. “I do hope that we get some legislative clarity sooner rather than later. I would love some resolution, one way or the other, as soon as we possibly can because this is only becoming more prominent.”
Watch video of the Federal Reserve Bank officials discussing marijuana, around 49:00 in this video.
The branch presidents echoed what other top federal financial officials have said in recent months. Treasury Secretary Steven Mnuchin told senators that “this issue needs to be resolved one way or another because there are conflicts in so many regulations and rules and everything else” during a hearing in March 2019.
Another Treasury official similarly told lawmakers that “this is really something I think that Congress needs to look at because nothing that we do can or does change what is prohibited under federal law.”
A resolution might be on the horizon after the House Financial Services Committee approved legislation that would shield banks servicing cannabis businesses from being penalized by financial regulators. That bill is now awaiting scheduling for a full House floor vote.