The senate voted mostly along party lines to approve the bill by a margin of 54 to 44.

It faces two remaining hurdles. There has not yet been a vote in the House. And the senate version included several provisions that president Bill Clinton has epeatedly warned would prompt a veto.

"We have taken a major step toward changing the fundamental structure of financial services in America," said Sen. Phil Gramm, a Texas Republican and the bill's primary sponsor.

Congress has tried for more than two decades to pass laws to modernise the US banking system. A bill that passed the House of Representatives by a single vote last year died in the Senate in the final days of the last Congress.

The effort was quickly revived this session as the powerful financial services lobby threw its weight behind it, and industry representatives hailed thesenate action.

"Final victory is in sight," said Dan Zielinski of the American Insurance Association. "It's taken years of effort and compromise and now we stand on the threshold of changing the landscape of financial services regulation.