By Michael Flaherty and Sarah N. Lynch
WASHINGTON (Reuters) - A bill to ease regulations across the U.S. financial sector passed a Senate committee on Thursday with no support from Democrats, in a setback to the largest overhaul of 2010 banking reforms since the rules were put in place.
The Senate Banking Committee cleared the Financial Regulatory Improvement Act of 2015 with all 12 Republicans voting in favor, and all 10 Democrats voting against.
Wall Street dodged a tough provision as Republican Senator David Vitter withdrew two amendments, one of which included a minimum 10 percent equity capital-to-asset ratio for banks with assets of more than $500 billion.
Vitter also did not offer up a bill he co-sponsored with Democrat Elizabeth Warren, which takes aim at Wall Street by curbing the Federal Reserve's emergency lending ability.
The relief bill, crafted by Committee Chairman Richard Shelby and his staff, is mainly focused on easing regulatory burdens on small financial institutions. Ranking Democrat Sherrod Brown has called it "a sprawling industry wish list of Dodd-Frank rollbacks," referring to the 2010 Wall Street Reform Act.
The bill also aims to enforce greater transparency for the Fed and other financial regulators.
Shelby, an Alabama Republican, must now exercise his dealmaking skills, with aides and analysts saying he needs votes from at least three Democrats on the committee to bring the bill to the Senate floor.
That challenge looked tougher on Thursday, with moderate Democrat Mark Warner of Virginia railing against the bill process, and strongly backing Brown.
"We continue to believe there is ample room for both sides to come together," said Bipartisan Policy Council Director Aaron Klein, expressing disappointment with the partisan vote.
One of the proposals is for the Fed to evaluate bank holding companies with assets of $50 billion to $500 billion for enhanced capital and stress test requirements. That would be a significant change to Dodd-Frank, which requires banks bigger than $50 billion to be subject to that level of supervision.
Bank of New York Mellon Corp, PNC Financial Services Inc, and State Street are among the banks that could benefit from the higher threshold.
Brown signaled a willingness to negotiate the new threshold, saying he agreed not all banks above $50 billion needed to be regulated like big banks. His alternative bill was voted down by the committee on Thursday.
Democrat Joe Donnelly voted in favor of two of Thursday's Republican amendments, the only Democrat to do so.
(Reporting by Michael Flaherty and Sarah Lynch; Editing by Richard Chang)