Two of Canada’s Biggest Banks Bail Out of Cannabis Industry

After 10 years or more with steady and substantial relationships with cannabis-based businesses and business owners, Scotiabank and the Royal Bank of Canada are shutting down, cancelling and prohibiting working with clients that are involved in the cannabis industry.

A puzzling problem for many Canadian companies, especially with legalization on the very near horizon for Canada, some business owners are very surprised by this decision, and are scrambling to figure out a new system for banking. “It’s kind of insulting really, especially when legalization is right on the horizon,” Hemp Country owner Nathan MacLellan says. “Nothing in the store that we sell is illegal. Every single variety store sells pipes and bongs nowadays, so why are they singling us out all of a sudden?”

Another company, a fledgling medical cannabis producer said it received a phone call from Scotiabank, advising them that it will “no longer be doing business with cannabis-related companies.”

Scotiabank spokesman Rick Roth said in an email correspondence with CTV News that due to privacy issues, the bank can’t comment on specific instances.

In general, however, Scotiabank aims to “manage risks soundly while making prudent business decisions,” said Roth. “We consider our stringent risk management practices a key strength of our business,” he said. “This is why the bank has taken the decision to close existing small business accounts and to prohibit the opening of new accounts for customers classified as ‘marijuana-related business.”‘

Roth added that Scotiabank will continue to monitor the industry and may change its position in the future.

Royal Bank (TSX:RY) also confirmed that it doesn’t provide banking services to companies “engaged in the production and distribution of marijuana.”

“We confirm that as part of our normal business practices, the bank periodically reviews the client relationships we have against several factors used to balance the benefits and risks associated with providing them with banking services,” spokesman AJ Goodman said in an email to CTV News.

“My gut feeling is that probably someone in risk analysis somewhere determined that marijuana was a topic which had uncertainty surrounding it,” Bruce Linton, CEO of Canopy Growth Corp. told CTV. “So rather than looking at determining which (companies) were in concert with the laws and which were not, all were treated the same.”

Perhaps these risk management situations will change back once the herb is fully legalized in the country, but for now, it just feels hypocritical and pointless. Why after 10 years would a bank go after these kinds of clients, especially being so close to full legalities?