Senate sends penny bill supported by banks to Trump's desk

• Key insight: The bill would let businesses and banks round cash transactions to the nearest five cents. 
• Forward look: President Donald Trump is expected to sign the bill into law. 
• What's at stake: Without the bill, banks might have had to absorb the cost of rounding every cash transaction. 

WASHINGTON — The Senate passed the Common Cents Act, which will make it easier for banks to adapt to the end of penny production, sending the bill to be signed into law by President Donald Trump. 

With the discontinuation of the penny, the bill will allow businesses and financial institutions to round cash transactions to the nearest nickel. It formalizes Trump's policy of ordering the penny to stop being made, but does not affect the value of existing pennies. 

Banks and other financial firms generally support the bill. Groups representing them in Washington had pushed back when the Treasury Department and Federal Reserve started taking steps to discontinue the penny without establishing rules such as those in the bill. They argued that doing so presented operational problems. 

When regional Fed banks said they would stop accepting penny deposits or orders at many coin terminal locations across the country, for example, the American Bankers Association said the move would put banks in "an untenable operational environment." The ABA said at the time that banks were facing the burden of monitoring each day which coin terminal locations would accept penny deposits and fulfill orders.

 The Fed eventually reversed its decision. 

The bill eases some of the operational challenges for banks. It also added new language to a previous version that passed through the House, which would require the Treasury Department to notify Congress 60 days before discontinuing any circulating coin, and allows the Treasury secretary to look at new compositions for nickel manufacturing to save costs.

The latest version of the legislation, which was approved by unanimous consent in the Senate, has already passed the House.

In a statement Tuesday, the ABA said the bill will help consumers, businesses and financial institutions adapt to the end of penny production with minimal disruption. 

"This legislation establishes a clear and practical framework for cash rounding when exact change cannot be provided while making clear that checks, credit cards and other noncash payment methods are not subject to rounding," the ABA said. "The Common Cents Act is a practical step that will modernize the nation's coinage system, reduce unnecessary costs and preserve stability in the cash distribution system."  

In a note, TD Cowen analyst Jaret Seiberg said the bill is a positive for both banks and merchants alike. 

"Without it, banks and merchants would have needed to incur the cost of rounding every cash transaction in favor of the customer in order to limit the risk of being sued," he said.