The financial institution cuts off the US cannabis industry without warning
Clients of Swiss bank Credit Suisse Group AG have recently been informed that the company will no longer be involved with any transactions in shares of cannabis companies whose operations are located in the US. It also indicated that it will no longer hold those shares on behalf of clients, at least according to one cannabis company executive and other industry sources. The global financial institution didn’t specify why it had made the decision, but it could impact a number of cannabis investors.
This Swiss lender was among the list of banks that had shown interest in buying and selling marijuana shares for US clients, but it appears that opinion has changed in a matter of days and its executives are refusing to comment on the issue. It is clear that investment banks working for cannabis-related companies could be at risk, as cannabis is still legal under U.S. federal law, and although various regulations are being worked on to ensure that this is no longer the case, it is not known if this may have influenced Credit Suisse’s decision.
Credit Suisse’s handling of its risk management and compliance has been highly criticized by investors, especially after it lost at least $4.7 billion in the collapse of Archegos, an investment firm dedicated to managing the fortune of hedge fund veteran Bill Hwang.
“When Credit Suisse withdrew custodian services from cannabis stocks, several large investors in the space lost their ability to custody the shares. That led to a significant sell-off,” said Abner Kurtin, CEO of Ascend Wellness Holdings Inc, a recent marijuana producer.
Since the start of 2021, the bank’s shares have fallen by more than 20% and according to recent indications, Credit Suisse is planning to cut its core brokerage business by perhaps a third.