Bankers versus Robin hood savings accounts.

[Paha87]

Last week, the crypto-trading platform Robinhood opened its 3% "checking and saving" accounts, which caused concern among us bankers, especially in the insurance and security sector.

New trading platform accounts, at first glance, look like regular savings accounts with higher profits. However, savings accounts are usually protected by the Federal Deposit insurance Corporation (FDIC). Instead, the account is protected by Robinhood Corporation of protection of investors in securities (SIPC).

Chris Cole, senior regulatory adviser to Independent American bankers (ICBA), said yesterday that the use of Robinhood banking terms "checking and saving" can be " deceptive»:

It is assumed that [Robinhood] has a brokerage account, but they make it look like a Bank account.


Unlike FDIC insurance coverage, SIPC insurance coverage only guarantees that the account holders ' balance will be returned to the value of their funds. Cole added,"it doesn't explain enough the difference between SIPC protection and FDIC insurance."

Issues raised by bankers and regulators

Stephen Harbeck, CEO of SIPC, has already voiced his concerns, telling news agencies that he was simply not consulted and that he has already filed a complaint with the U.S. securities and exchange Commission (SEC) on the matter. Harbeck told CNBC:

We want to make sure that investors know that there is some risk.

Robinhood has not yet released an official answer to the problems raised, but the platform's website frequently asked questions about the new product says:

Your funds and securities in Robinhood are protected by SIPC for a total amount of up to 500'000 dollars, of which 250'000 can be cash, the rest - in securities. As with FDIC insurance, SIPC protects the funds in your account in the event of a financial firm failure.

Sarah granot, a representative Of the American Association of bankers, apparently also taking note, said in an interview:

We appreciate any efforts by regulators to clarify when deposits are fully insured and when they are not, and the need to respond quickly to distortions.

Attorney Brian Hester said Robinhood could be classified as an" unlicensed banking business "if regulators do not treat new savings products as" incidental " to its securities trading business.

Robinhood is a broker-dealer, not registered as a regular Bank. As such, the company was not required to demonstrate the liquidity and risk management processes that regulated banks were required to perform. It also does not have access to FDIC protection for its customers.

This, combined with offering rates well above an average of 0.08% for current accounts and 0.1% for us savings accounts, is likely to continue to cause noise among bankers, associations, and regulators. Any subsequent action by the US SEC or SIPC may affect both the new products and the existing Robinhood trading business.


Link to the source of information (Russian) - https://altstake.io/news/bankiry-protivsberegatelynyh-schetov-robinhood