The Senate Banking Committee is expected to approve legislation by the end of the month that would roll back more than 40 bank regulations.
Though much of the attention has been focused on measures that would let banks offer interest-bearing business checking accounts and earn interest on funds they must keep at the Federal Reserve, other provisions are also important to the industry.
But bankers face an uphill fight to preserve two of the key measures because of opposition from the Clinton administration, regulators, and the Senate Banking Committee's top Democrat.
The most controversial provision would remove anti-tying restrictions that prohibit banks from requiring borrowers to purchase insurance or other nonbanking products and from offering bundles of products at discounted prices. Another key measure drawing heat would eliminate a requirement that banks reduce the value of purchased mortgage servicing rights before adding them to capital.
At a hearing last week, Sen. Connie Mack, R-Fla., said the anti-tying rules are outdated and hurt bank customers by preventing them from getting package deals on financial services.
But Sen. Paul Sarbanes, the committee's ranking Democrat, denounced the measure. "This would eliminate a fundamental protection for consumers," he said.
The bill's authors, Sens. Mack and Richard Shelby, R-Ala., appear to have enough votes to pass the bill through the Banking Committee as is-13 of the panel's 18 members are co-sponsors. But they are likely to back off controversial measures to get the bill through the full Senate.
They already have accommodated Democrats by shunning proposals that would weaken the Community Reinvestment Act. Last week, they signaled that they are willing to strike more deals to get strong bipartisan support.
Bankers also face a fight over a measure that would eliminate the mandatory 10% capital reduction imposed on the market value of mortgage servicing rights banks buy from other lenders.
Treasury Under Secretary John D. Hawke Jr. warned that regulators have already proposed increasing the amount of mortgage servicing rights that can be counted toward Tier 1 capital and the Senate bill would go too far.
With the administration also opposed to paying interest on reserves banks keep at the Fed, the dealmaking will make the bill less enticing to the industry, but a number of helpful changes are certain to remain.
For instance, regulators and the industry strongly endorsed eliminating a requirement that thrifts keep at least 4% of capital for demand deposits and borrowings that are payable in one year.
Other important provisions would:
Streamline rules permitting banks to set up parent holding companies.
Require regulators to account for the presence of credit unions, finance companies, and other financial firms when evaluating the competitive impact of proposed bank mergers.
Allow banks to purchase and hold their own stock in order to reduce excess capital or to acquire shares for employee stock plans.
Drop a requirement that thrifts owned by holding companies notify the Office of Thrift Supervision 30 days before paying a dividend to shareholders.
Enactment of those provisions, while not a major victory for banks, would be a "positive step toward restoring balance and sanity to the regulatory process," said Amsouth Bank general counsel Stephen A. Yoder.
