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US Senate's major Dodd-Frank revision bill undergoing final touches

The U.S. House of Representatives is negotiating last-minute changes to Senate legislation reforming large swaths of the post-crisis Dodd-Frank regulatory framework.

If passed, the bill would raise the threshold for enhanced prudential supervision to $250 billion from the current $50 billion level. Among other things, it would also increase the number of small banks allowed to operate with high debt levels, and it would exempt banks with less than $10 billion in assets from the proprietary trading ban known as the Volcker rule.

Although House Republicans would have liked to see more dramatic rollbacks to the current financial regulatory regime, any changes to the bill, which is scheduled for a Senate floor vote March 6, are expected to be small to keep Democratic support.

A House Republican aide said House leadership, led by Financial Services Committee Chair Jeb Hensarling, is involved in talks with the Senate to introduce a manager's amendment, a negotiated bundle of changes endorsed by the bill's creators that would make the bill more palatable to House members. The manager's amendment is still being worked on, and details have not yet been released.

Hensarling's strategy is likely aimed at allowing the House to simply vote on the Senate bill once it passes, streamlining the legislative process and paving a clear path to President Donald Trump's desk.

A Democratic House aide said it is unlikely that House Minority Leader Nancy Pelosi, D-Calif., will be able to stop legislative passage after the Senate moves. Republicans, with only 51 seats, need bipartisan support to garner the 60 votes to pass legislation, and the bill has 12 Democrats and one Independent signed as cosponsors.

"If you get 60-plus senators, you ain't drawing a goose egg in the House," the aide said.

A spokesperson for the White House did not clarify a stance on the bill, but Trump has long supported changes to Dodd-Frank.

Democrats brokered the deal by including a provision that would require credit bureaus to provide consumers with unlimited free security freezes and removals.

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"This is the first time with Dodd-Frank that we've broken the dam," Patomak Global Partners CEO and former Trump administration financial policy adviser Paul Atkins said at a conference March 5.

The bill has pleased midsize banks that stand to gain from the legislation by being removed from the Federal Reserve's enhanced prudential oversight. On March 5, 13 banks and financial companies, including M&T Bank Corp. and Fifth Third Bancorp, wrote to the Senate Banking Committee expressing support for a "common-sense approach" that would reduce regulations on their businesses.

Not everyone in the banking industry is thrilled with the legislation. The country's largest banks are unhappy with a carve-out provision for custody banks, which would relax the application of the supplementary leverage ratio, or SLR, by no longer counting funds parked at central banks toward the SLR denominator. JPMorgan Chase & Co. and Citigroup Inc. have pushed for changes that would expand the SLR accounting tweak to all global systemically important banks as well, since the provision currently only applies to Bank of New York Mellon Corp., State Street Corp. and Northern Trust Corp.

"As Congress has sought to make a common sense change to the way capital rules treat custody assets, we have asked that they apply that change to all custody banks to maintain a level playing field in this important business," a Citi spokesman said in an email.

Last-minute changes that would benefit the largest banks would have a hard time finding support among Democrats eager to promote the bill as relief for community financial institutions.

Democrats opposing the bill, such as Elizabeth Warren of Massachusetts and Senate Banking Committee Ranking Member Sherrod Brown of Ohio, are likely to propose many amendments to the bill in a last-ditch effort. The amendments could target hot-button issues such as student loan dischargeability and the regulation of international banks.

"We highly doubt that any of these contentious floor amendments will be included in the final package, but the headline potential is noteworthy," Boltansky wrote.