A House and Senate conference committee has put the finishing touches to the financial regulatory reform bill.

A 43-member committee met over two weeks to hammer out changes in the bill and concluded its work in a 20-hour marathon session that finally wrapped up around 5:30 Friday morning.

“This is a tremendous day,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn. “After great debate, we have produced a strong Wall Street reform bill that will fundamentally change the way our financial services sector is regulated.”

The final bill must still be voted on by the full Senate and House before it can be passed. A vote is expected next week, and President Obama hopes to sign it into law before July 4. “The reforms making their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we’re still recovering from,” he said.

Among the many compromises in the bill was an agreement to locate the Consumer Financial Protection Agency as a bureau within the Federal Reserve, as in the Senate version of the bill. In the House version of the bill, it was a stand-alone agency. Public accountants are exempted from regulation by the bureau. In one of the final compromises reached on the legislation, automobile dealers are also exempted from regulation by the bureau.

Other compromises reached by House and Senate negotiators softened provisions related to derivatives regulation and the so-called Volcker Rule, which originally would have banned proprietary trading with federally insured banks’ own funds and ownership of hedge funds by them. Banks will instead be able to invest up to 3 percent of their tangible common equity in hedge funds and private equity funds, and own only up to 3 percent of the funds’ capital.

In the area of derivatives trading, lawmakers compromised early Friday morning on a measure that would allow federally insured banks to set up separately capitalized units to trade some of the riskier types of derivatives. Sen. Blanche Lincoln, D-Ark., had pushed for even stricter regulation of the derivatives on the committee, but ultimately agreed to some compromises. Lawmakers also agreed to have the SEC conduct a study of whether stockbrokers should be held to the same standards of fiduciary duty as financial advisors.

The conference committee also approved amendments that would help encourage the move toward Extensible Business Reporting Language, or XBRL, financial reporting technology across the capital markets in the U.S. for regulatory reporting.

Treasury Secretary Timothy Geithner hailed the final conference committee agreement. “The bill that has emerged from Conference is strong,” he said. “It represents the most sweeping set of financial reforms since those that followed the Great Depression. 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. We urge Congress to carry the momentum forward and move swiftly towards final passage.”

The financial industry heavily lobbied lawmakers over the past year to soften various provisions of the bill. “The industry is committed to making this bill work,” said Steve Bartlett, president and CEO of the Financial Services Roundtable. “There is a lot to like in this legislation, but ultimately, we have some concerns about the impact to consumers, industry and economy. We are very pleased to have this certainty and closure about how we can continue to move our economy forward.”

In a recent KPMG survey, nearly 90 percent of the 134 banking and financial services executives surveyed believed systemic risk regulation would be enacted as part of the financial reform bill, and more than half expect this regulation to most impact their businesses if implemented. The creation of a consumer protection agency was cited by 87 percent of the executives as likely to be enacted and was cited second most frequently as a regulation most impacting their business if implemented.

“Financial regulation is expected to have a significant impact on the financial services industry,” said Scott Marcello, deputy leader of KPMG LLP’s Financial Services practice.  “While the impact will vary depending on the final form of the legislation, it is likely to have sweeping implications - including governance, risk, compliance, and capital - for financial institutions.”

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