19 Feb, 2021
Virginia banks in $31.6M deal; small brokers win as Robinhood users jump ship
By Maitree Christian
TOP NEWS IN BANKING & FINANCIAL SERVICES
* In Virginia, First National Corp. agreed to purchase Bank of Fincastle for a combination of stock and cash valued at approximately $31.6 million, or $3.09 per share for each share of Fincastle's common stock outstanding. The combined company is expected to have approximately $1.2 billion in assets, $868 million in loans, $1.0 billion in deposits and 20 branch offices across Virginia.
* Retail investors angry over Robinhood Markets Inc.'s trading restrictions sought other trading platforms and moved to small-scale brokerage firms like M1 Finance LLC, Acorns Advisers LLC and Public Holdings Inc., which saw sharp increases in their clients in January, Bloomberg News reported. However, other firms, unlike Robinhood, do not offer features like fractional investing or options trading and are still significantly small compared to the clientele of Robinhood or Fidelity Investments, the report noted.
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Key financial trade groups laid out a vision Feb. 18 for shifting the U.S. to a low-carbon economy, saying that the industry can play a leading role in limiting the risks that climate change poses to the system.
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Green bond issuance in 2020 surpassed 2019 levels and appears poised to continue its upward trajectory. Europe currently has the largest share of the green bond market, but that could change under President Joe Biden's administration.
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U.S. banks and thrifts opened 58 branches and permanently closed 362 during January, according to S&P Global Market Intelligence data.
BANKING
* In Illinois, First National Bank is merging with Washington Savings MHC unit Washington Savings Bank in a deal expected to close in the third quarter. Financial terms of the deal were not disclosed.
FINANCIAL SERVICES
* At a Feb. 18 hearing on the GameStop Corp. saga, Robinhood CEO Vlad Tenev apologized for the confusion that resulted around the temporary trading restrictions his company imposed on its clients Jan. 28. He went on throughout the hearing to reiterate that the decision was driven by a staggering $3 billion margin call the brokerage received early in the morning Jan. 28 from its clearinghouse, National Securities Clearing Corp.
* Tenev also said Robinhood generates more revenue from the controversial practice of payment for order flow than any other source. He confirmed that Robinhood's biggest revenue source comes from payments that wholesale trading giants like Citadel Securities LLC and Virtu Financial Inc. give to the company in return for the ability to execute its customers' stock and options orders.
* Elsewhere, Sen. Elizabeth Warren, D-Mass., sent a letter to Financial Industry Regulatory Authority chief Robert Cook, urging the regulator to review if Robinhood's use of forced arbitration clauses in customer agreements is limiting investors' ability to obtain relief in court, InvestmentNews reported.
* Purpose Investments Inc. launched what it described as the world's first bitcoin exchange-traded fund. Purpose Bitcoin ETF began trading Feb. 18 on the Toronto Stock Exchange and will invest directly in physically settled bitcoin, not derivatives, providing investors access to the asset class of cryptocurrency without the associated risk of self-custody within a digital wallet.
POLICY AND REGULATION
* The Federal Reserve Board announced a final rule aimed at reducing risk and increasing efficiency in the financial system by applying netting protections to a broader range of financial institutions. The final rule, among other things, amends Regulation EE (Financial Institution Netting) to apply netting provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 to certain new entities including swap dealers.
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