Thought Leadership

Cutting Through the Confusion: Hemp Banking is Not Cannabis Banking and We’re Ready

Timothy Romig
Executive Vice President, Managing Director & Market President – Pennsylvania and New Jersey, Customers Bank

The 2018 Farm Bill ended an 80-year Federal ban on growing industrial hemp. This law opens the U.S. to a global market, that according to research firm FIOR Markets, is expected to increase from $4.41 billion in 2018 to an estimated $14.67 billion by 2026. According to a report by Hemp Business Journal, total sales for the U.S. hemp industry reached $820 million in 2017, and is projected to reach $1.9 billion by 2022.

Despite the economic opportunity, governing public policy is unclear.  There remains significant ambiguity regarding licensing, testing, processing, transportation, law enforcement and even access to banking services for hemp-related businesses.  Spreading the authority for rules and regulations across numerous regulatory agencies is the cause of the ambiguity and confusion.

According to Erica Stark, Executive Director for the Pennsylvania Hemp Industry Council (PAHIC), while the Farm Bill legalized the growing, processing and marketing of industrial hemp, it placed the U.S. Department of Agriculture (USDA) in charge of regulating the cultivation of industrial hemp.  The Farm Bill, however, preserves states’ rights validating the power of each state to determine whether it will allow cultivation.  Those that will allow cultivation of industrial hemp must submit a statewide plan to the USDA.

Under the Farm Bill, hemp-derived CBD (cannabidiol) products were placed under the jurisdiction of the U.S. Food and Drug Administration (FDA).  FDA rules make it illegal to sell food that contains CBD ingredients and to market CBD products as dietary supplements.

Missing from the Farm Bill altogether was direction to the many regulatory agencies that oversee banks and credit unions: state agencies, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Bank, the Office of the Comptroller of the Currency (OCC), Farm Credit Administration (FCA) and the National Credit Union Administration (NCUA).

Each agency is autonomous and has its own lengthy rule-making process and procedures.  Each supervises banks or credit unions in its own unique way.  There have been calls by policymakers and political candidates for a rational approach and clear guidance.  On August 15, Marijuana Moment – a self-described up-to-the-minute news source covering the politics, business and culture of cannabis – reported that the heads of the Federal Reserve, FDIC, OCC, FCA and NCUA responded they do not plan on issuing specific guidance related to banking hemp-related businesses, but they are continuing to have conversations with financial institutions about the topic and will monitor the industry. Most of the agencies made it clear the decision to open, close and decline accounts is left up to the individual financial institution. However, more recently, the NCUA announced it will allow federally insured credit unions to provide select financial services to HRB.

Taking Initiative

Customers Bank knows the patchwork of public policy is confusing.  We’re monitoring the development of policy and creating internal procedures and controls that allow us to provide much needed banking services in conformity with law and regulations, protecting ourselves and our clients.

While other banks turn away businesses in this growing industry, our commitment to the economic wellbeing of our community and region drives us to engage with hemp and hemp-derived CBD companies, helping them set up their businesses, take payments and grow sustainably. Our industry experts have identified banking solutions to address the unique requirements of hemp-related businesses and hemp-derived CBD businesses.

We are committed to offering a full suite of commercial banking services, along with online banking options, customized to meet the specific needs of hemp-related and hemp-derived CBD companies, including: Commercial Checking, Online and Mobile Banking, Fraud Protection, ACH Payment, Online Wire Transfer Services, Business Bill Pay and more.

In addition, we pair our hemp-related business and hemp-derived CBD customers with a knowledgeable specialty team who understands the industry and combines personalized service with local decision-making to help grow and support these important businesses.

Having the right banking partner is a key to success for any business. Choosing the right financial partner for hemp-related business and hemp-derived CBD companies is critical as numerous financial institutions have dropped banking services for such businesses without notice. Having a relationship with your banker is important to your growing business needs — today, tomorrow and in the future.

Contact us today to learn how we can help grow your hemp-related business or hemp-derived CBD business.