3-7-18 8:24 PM EST | Email Article
By Andrew Ackerman 

WASHINGTON -- Senators expanded a bipartisan bill aimed at rolling back postcrisis rules on Wednesday, adding a provision aimed at limiting regulators' ability to restrict commercial-real-estate lending and clarifying U.S. regulators can tightly oversee foreign banks with significant U.S. operations.

The additions, which also touch on student-loan lending, identity fraud, corporate capital raising and other issues, still need to be approved by the Senate, which is expected to vote on the measure next week.

The foreign-bank provision aims to address critics' concerns that an earlier version of the bill might have made it more difficult for the Federal Reserve to impose stricter rules on Deutsche Bank AG and other overseas firms with sizable U.S. operations. Sen. Sherrod Brown (D., Ohio), a leading opponent of the measure, warned on the Senate floor earlier Wednesday that the bill "weakens oversight of foreign megabanks."

At issue is a central component of the bill that could relieve about two dozen U.S. banks from stricter rules put in place by the 2010 Dodd-Frank financial law. The bill will raise the threshold at which such banks face tighter oversight to $250 billion in assets from the current $50 billion -- a victory for midsize banks, which have long said they shouldn't be lumped in with the largest, global banks.

Yet critics complained that such a move would put pressure on the Fed to also loosen their oversight of foreign banks with less than $250 billion in U.S. assets, including Deutsche Bank, even though the bill doesn't require them to do so. Critics objected to potentially lightening the regulatory load on such firms, citing a spate of recent misconduct at the firms.

Wednesday's expanded version of the bill includes a "clarification for foreign banks" that essentially says nothing in the bill shall limit the Fed's ability to strictly regulate foreign banks with more than $100 billion in world-wide assets.

Another new section limits regulators' ability to restrict banks' commercial-real-estate lending by directing regulators to impose relatively high capital requirements on that lending only under certain conditions. The language is similar to stand-alone legislation that easily passed the House last year, over the objections of consumer advocates.

And another section added to the bill would take steps to combat "synthetic identity fraud," where swindlers make up fake identities and take out loans in those names. It would require the Social Security Administration to run a database allowing financial institutions to verify whether a name, Social Security number or date of birth are tied to a real person.

The bill also includes a provision that would wipe out an exemption that allowed banks to sell debt funds to Puerto Rican investors that lacked the protections of U.S. mutual-fund laws. Critics have said the exemption allowed UBS Group AG to sell funds to island residents that later suffered big losses, wiping out many clients' life savings.

The underlying bill is the product of months of negotiation between a group of centrist Democrats -- including North Dakota Sen. Heidi Heitkamp and Virginia Sen. Mark Warner -- and Senate Banking Committee Chairman Mike Crapo (R., Idaho). The sections added Wednesday are at least partly meant to make the measure more palatable to the House, where it is expected to advance after it clears the Senate as early as Tuesday.

Lawmakers behind the updated bill released a 200-page version of the legislative text late Wednesday but had no immediate comment on the new version.

--Lalita Clozel, Ryan Tracy and Dave Michaels contributed to this article.

Write to Andrew Ackerman at andrew.ackerman@wsj.com


(END) Dow Jones Newswires

March 07, 2018 20:24 ET (01:24 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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