US lawmakers clear bank reform bill

A panel of US lawmakers approved a sweeping bank reform bill, aimed at curbing some of the questionable activities of Wall Street in a bid to avert another financial crisis. According to reports, the so-called "too big to fail" Wall Street banks will face new fees and restrictions. Also, the bill brings derivatives market into the spotlight. The bill will create a consumer protection agency, besides clearing the 'Volcker' rule that intends to curb the proprietary trading activities of the big banks on Wall Street.



American congressional negotiators reportedly reached an agreement early Friday morning to reconcile competing versions of the House and Senate bills, marking the biggest overhaul of financial regulations since the Great Depression. The House representatives voted 20-11 to approve the bill while the Senate members voted 7-5 to approve the final legislation. The agreement clears the way for both the houses of the US Congress to vote on the full financial regulatory bill next week.

Members of Congress also voted to impose a new conflict of interest rules and a surprise US$19bn levy on the industry. Towards the end of the 20-hour debate, Barney Frank, chairman of the House financial services committee, announced the surprise bank fee, saying that it was legitimate to ask financial institutions whose collective errors had damaged the economy to pay the cost of the reform. However, a ban on banks investing in hedge funds was relaxed to allow them to invest up to 3% of their tier one capital. An earlier proposal allowed 2% of tangible common equity - a difference worth billions to the biggest banks.

Following the conclusion of the House-Senate Conference on the financial reform bill, US Treasury Secretary Tim Geithner called the legislation strong. "It establishes the greatest consumer financial protections in American history. It prevents financial firms from taking risks that will threaten the economy. And it provides the government with significant new tools to better protect taxpayers from the damage of future financial crises," he said in a statement.