The sun rises to the east of the US Federal Reserve building in Washington DC. Picture: REUTERS
The sun rises to the east of the US Federal Reserve building in Washington DC. Picture: REUTERS

Washington — A US Senate committee advanced legislation on Tuesday that would ease financial rules for banks for the first time since the 2007-09 financial crisis.

The Senate banking committee advanced the legislative package by a vote of 16 to seven, where it now heads to the full Senate for consideration.

The bill would ease regulatory requirements for banks with less than $250bn in assets, among other changes to rules imposed by the 2010 Dodd-Frank financial reform law.

The bill is supported by nearly every Republican in the Senate and at least 12 Democrats, making its passage extremely likely. The high likelihood the changes become law has led to intense lobbying by industry groups eager to see legal changes included in the measure that they view as beneficial.

More than 100 amendments were proposed to the bill, primarily by Democrats looking to trim favourable provisions for banks and boosting consumer protections. But the four moderate Democrats on the committee joined with the panel’s 12 Republicans to oppose any changes to the compromise package, which was first announced in November.

While the bill seems likely to pass the Senate, its path forward remains unclear. Lawmakers are facing a busy December schedule, including efforts to finalise a tax-cut package and the need to pass a funding bill to avert a government shutdown.

"Financial regulation should promote safety and soundness while enabling a vibrant and growing economy," said committee chairperson Mike Crapo. "The bill we are marking up today is the product of a thorough, robust process, and honest, bipartisan negotiations."

Proponents argue the bill would help spur the economy by encouraging lending, but critics argue it increases the risk of future crises while aiding banks that already enjoy record profits. "This bill is about helping the banks, including the largest of the largest," said Senator Sherrod Brown.

The legislation makes a number of changes to heightened financial rules enacted as part of the 2010 Dodd-Frank financial reform law, with the relief aimed primarily at smaller banks and credit unions. However, there are a handful of provisions beneficial to larger banks, most notably exempting some larger banks from heightened regulatory scrutiny as "systemically important" financial institutions.

The bill raises the threshold by which banks face those stricter rules from $50bn in assets to $250bn. Banks with assets between $50bn and $100bn would be exempt once the bill is enacted, while those with assets between $100bn and $250bn would be exempted 18 months later.

The Federal Reserve would have flexibility to release banks from stricter rules sooner, or reinstate them for scrutiny under certain conditions as part of the legislation. The bill also exempts banks with less than $10bn in assets from several regulatory requirements, including the Volcker Rule ban on proprietary trading.


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