Regulators ease hemp banking rules; alternative credit checks get the nod

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Safe from suspicion

Federal and state bank regulators said Tuesday that banks “would no longer be required to file suspicious activity reports on customers who cultivate hemp,” the Wall Street Journal reports. The announcement was made by the Treasury Department’s Financial Crimes Enforcement Network along with the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Conference of State Bank Supervisors.

“The change could provide a major boost to a niche product that began its own legalization process last year,” the New York Times says. “While the change will help businesses making clothes and other hemp products, it does not affect the legal marijuana businesses dealing with the same problems. The federal government still considers marijuana to be illegal, and even local banks have been too worried about getting in trouble to deal with them.”

"The regulators' statement said that since hemp is no longer considered a banned narcotic, a SAR is no longer required," American Banker reports.

Loss for the president

A federal appeals court in New York ruled Tuesday that Deutsche Bank and Capital One must comply with subpoenas from House Democrats to gain access to President Trump’s private financial records. The president has seven days to appeal the decision.

The decision “adds to a string of cases that will probably be ultimately decided by the Supreme Court, which Mr. Trump has asked to support his claims of immunity from investigation,” the Financial Times says. Financial Times, New York Times, Washington Post, American Banker

Wall Street Journal

Alternatives OK

Federal banking regulators Tuesday “endorsed alternatives to traditional methods of assessing creditworthiness” that may make it easier for “consumers with spotty or no credit histories” to get loans. The regulators “backed the use of information such as borrowers’ cash flow as an alternative to the traditional credit-evaluation system, which relies on scores issued by companies such as Equifax and Experian based on applicants’ past history of borrowing and repayments.”

Alternative data “may help firms evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system,” the regulators said.

The decision “will likely be seen by banks and the fintech industry as a green light for certain practices that have been operating in fuzzy legal territory for years, like using artificial intelligence to determine creditworthiness,” American Banker said.

Saving until it hurts

German consumers, companies and even the federal government in Berlin haven’t lost their penchant for saving even in “a world of negative interest rates, [where] stockpiling cash has left German households poorer than their international peers in terms of wealth, hindered German companies from investing in their future and restrained economic growth across Europe,” the paper says.

“Some economists think German frugality isn’t a behavior easily changed by policy, but rather it is part of an identity built over three centuries of revolution, hyperinflation, wars, depression and dictatorship. Germany’s commitment to thrift has endured because of the stability of its savings banks and the acceptance by working-class people of thrift as a virtue.”

Financial Times

11th hour funding

Just hours before its provisional banking license was due to expire, U.K. lender Zopa — “a pioneer of peer-to-peer lending” — raised £140 million from U.S. investor IAG Capital “in a last-minute effort to salvage its bid to secure a full banking license.” Founded in 2005, Zopa “has recently tried to transition toward more traditional sources of funding. It received a provisional banking license last year, but needed to raise extra capital to assure regulators it was stable enough to operate as a full bank.”

“We are excited that once approved [for a full banking license], Zopa will be able to launch its bank alongside its peer-to-peer business and offer a broader set of products to our customers,” CEO Jaidev Janardana said. The funding means that IAG, which was already a minority investor in Zopa, will have majority control of the company.

No surrender

Gemini Trust, the cryptocurrency exchange created by Cameron and Tyler Winklevoss, has hired Julian Sawyer, the co-founder of U.K. digital bank Starling, “to kick-start a European expansion, even as the fever over digital currencies cools. The Winklevoss brothers were early and vocal backers of bitcoin, but their attempts to launch an exchange-traded fund backed by cryptocurrency suffered a series of setbacks over concerns about a lack of market regulation.” Bitcoin now trades at about $7,000, down from its $20,000 peak of two years ago.


“We appreciate the steps regulators have taken today to clarify regulatory expectations for banks, and we look forward to working with them as they develop additional guidance.” — American Bankers Association president Rob Nichols on new federal regulations making it easier for banks to service customers in the hemp industry

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