By Tony C. Dreibus
MBank, the small Oregon-based financial institution that has serviced the cannabis industry since last year, told Marijuana Business Daily that it will close all of its accounts with marijuana companies in the next two months.
Jef Baker, the CEO and president of MBank, said the cost and time spent on compliance is too much for the Gresham, Oregon-based community bank to handle. The company – which quickly became one of the largest banks serving the marijuana industry – has about 70 to 75 accounts with cannabis businesses, Baker said. Most of them are in Oregon, though a few are in Washington State.
“We just do not have the resources to manage the compliance necessary” to service the cannabis industry, he said. “This is not what we want to do, this is what we have to do. We got into this business to serve an underserved group and I wish we could still do that.”
Aside from putting some marijuana businesses in a difficult position, the decision could present a setback for cannabis banking in general, as MBank’s experience might deter other financial institutions from getting involved in the industry.
“My personal opinion is that it will have a negative effect on other banks’ appetites,” Baker said. “Anytime one of us exits a business it’s a red flag of sorts. I don’t think this is going to be a positive.”
Baker said he will try to stay active in the cannabis industry through speaking engagements and board participation, but the small bank will be unable to serve dispensaries and other cannabis companies in Oregon and Washington.
MBank moved into Colorado for a very short time – one week – before changing its mind, saying it didn’t have the infrastructure to handle all the customers that sought its services. The Denver Post said at the time that federal regulators told MBank that it was too risky to cross state lines and open in Colorado because of the federal illegality of the nascent cannabis industry.
The bank’s customers will have “a couple months” before their accounts are closed, so it will not be “an overnight thing,” Baker said Friday afternoon.
While Baker said he wants to see the industry’s problems with banking solved, small community banks such as MBank likely will not be able to service the industry because of the cost of compliance.
“It’s going to take a large bank with a lot of resources,” he said.
Tony C. Dreibus can be reached at email@example.com