What You’ll Learn
- Find out what steps are taken by credit unions that provide cannabis banking for businesses to protect our members’ deposits.
- Get a brief overview of what often makes credit unions different than banks when it comes to recent financial industry turbulence.
With recent bank failures, such as Silicon Valley Bank and First Republic Bank, many cannabis business owners and leaders are naturally wondering about the stability of their own financial institutions. As anyone in the cannabis industry will tell you, cannabis businesses and their employees face obstacles when it comes to accessing banking services. So, when there is some turbulence in the wider financial industry, it’s understandable to wonder, “What does this mean for my business?”
In times of uncertainty, it’s always a good idea to focus on the facts. And the fact is, while credit unions like Salal are not immune from the challenges faced by the financial industry, there are some fundamental differences between a credit union and a for-profit bank. Here are some good things to keep in mind about Salal’s sound financial footing and the steps we take to keep your deposits safe.
The Benefits of Being Member-Owned
Credit unions are member-owned financial institutions. Unlike banks, they don’t have stock that is traded on a stock exchange. This means a credit union like Salal isn’t directly impacted by the ups and downs of the stock market. It also means we don’t have an incentive to take big risks in the pursuit of profits. When it comes to protecting our members’ money, slow and steady wins the race. We’re happy to be more tortoise than rabbit.
And unlike banks such as Silicon Valley, over 90% of Salal’s deposits come from local community consumers and small business members. More depositors and smaller average deposit sizes means less vulnerability to the kind of speculative, social media-fueled bank runs we witnessed with Silicon Valley Bank. Nationally, at least some small businesses are seeing this benefit for themselves. A recent survey found a shift underway, as small businesses moved from banks to credit unions.
Thorough Regulation and Audits
It’s not exactly the most exciting topic in the world, but it matters a lot when we’re talking about the health of a financial institution. Think of it as a regular check-up at the doctor’s office, but for a financial institution. Credit unions like Salal get checked often by both our own staff (internal) and outside experts (external), like auditors and state and federal regulators (external). These checks are like a thorough examination to make sure the credit union is following the rules, operating smartly, and has safety measures in place to protect the money that members have deposited.
There’s a whole range of rules that credit unions need to follow. These include rules about how they lend money, how we protect their customers, how we prevent illegal activities like money laundering, and even how we protect their computer systems (cybersecurity). There are also more specific rules around having enough money on hand (capital adequacy), investing activities, and the way we decide to give out loans (loan underwriting). These are regularly checked by agencies like the National Credit Union Administration (NCUA) to ensure everything is in order. The NCUA also puts stricter limits on how much credit unions can lend compared to banks.
Because Salal serves the cannabis industry, we are even more tightly regulated than most credit unions. Since 2014, we’ve worked closely with state regulators to provide a safe and legal way for cannabis businesses to access vital banking services. What began as an effort to prevent crime and boost public safety has turned into an enduring commitment to this exciting new industry. But it’s not easy. We need to have many more compliance staff members than a typical credit union to handle the added regulatory tasks that come with cannabis banking. The added regulatory requirements have led us to develop a culture of doing things “by the book.” And, of course, it’s all worth it when we see the positive impact we’ve had for the cannabis industry.
Moving Forward with Confidence
There is still plenty of uncertainty out there in the economy. As we navigate these waters together, it can be helpful to remember that we have many safeguards and protective measures in place to protect your business’s deposits. And remember, as a Salal business member, you can always reach out to your Business Officer or anyone on the Business Services team if you have any questions or concerns. Connect with us at 206.298.9398 or BusinessServices@SalalCU.org.