The proposed merger between Calif.-based Summit Bancshares Inc. and Faciam Holdings Inc. could compel the FDIC to take a harder stance against financial institutions that do business with the budding recreational pot sector, according to a report from S&P Global Market Intelligence.

The San Francisco Regional Office of the FDIC said it will recommend denial of Summit's application for the merger due to it's business plan, which includes an intention to service marijuana-related businesses, or MRBs. Marijuana is legal for both recreational and medicinal purposes in California, but it is still illegal under federal law. Currently, banks that provide services to MRBs could be prosecuted for money-laundering or drug trafficking under federal laws, according to Morgan Fox, media relations director for the National Cannabis Industry Association, a trade group for marijuana businesses.

In an unprecedented move the says it bank plans to continue with the merger anyway, which S&P expects will force a showdown on the issue with federal regulatory agencies.

"The Board of Summit has decided to not withdraw the application and to require the FDIC to go on record to deny the application," Board Chair Shirley Nelson wrote in the letter.

The bank's board believes the matter is important enough to be decided by FDIC leadership, a Summit attorney told S&P.

This is reportedly the first time the FDIC has been asked to directly grant or deny a bank access to cannabis banking.

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