Strict swap desk reforms set to stay in final US financial bill

A sweeping overhaul of US financial regulations will include a controversial plan to insulate banks from risky swap dealing, aides said yesterday as lawmakers hammered out a final bill.

With final negotiations on the reform bill bogged down amid partisan bickering, Democrats who control the process neared consensus on an element that has drawn furious opposition from the Wall Street banks that could lose billions in profits.

The deal would require banks to isolate their swaps desks in separate affiliates, which would require the banks to raise new capital and deprive them of profits they get from dealing. But it would allow their parent holding companies to retain the value of the operations.

Lawmakers also agreed to set higher capital requirements on banks and financial firms, though they remained at odds on some elements of the proposal.

And the U Federal Reserve won another battle to maintain its independence as lawmakers on the House-Senate panel dropped a plan to have the head of its New York division appointed by the US President, rather than its board of directors.