A sweeping overhaul of banking rules appeared to be headed toward another roadblock in the U.S. Senate on Tuesday, although an influential Republican predicted it ultimately will pass the chamber.

As Democrats moved to force a series of procedural votes seeking to open formal debate on the bill, key moderate Republicans said they still saw no reason to change their minds since voting to block the bill on Monday.

I don't think sufficient time has elapsed to allow both sides to complete negotiations, said Senator Susan Collins.

Senator Ben Nelson, the lone Democrat who joined Republicans in opposing the bill on Monday, also said his concerns had not yet been resolved.

Even as Republicans held out for further negotiations to reshape the 1,558-page bill along more moderate lines, Republican Senator Judd Gregg, a leading figure in the party, said it will ultimately pass.

It's going to get a very large vote from people who want to send a message that they're against Wall Street and for populism, Gregg said at the Reuters Global Financial Regulation Summit in Washington.

Senate Democratic Leader Harry Reid set a fresh vote on opening debate for 4:30 p.m. EDT (2030 GMT) on Tuesday. If Republicans again block the bill, another vote will come Wednesday, aides said.

The votes are an attempt by Democrats to cast Republicans as Wall Street's allies, while also testing Republicans' resolve to stay united in stifling Senate debate of the stiffest crackdown on banks since the Great Depression.

SNOWE SAYS HEARTENED

Moderate Republican Senator Olympia Snowe said she was heartened that the Democrats had kept tough language to police the $450 trillion derivatives market in their bill, but she said she wanted to ensure small businesses would not be hurt.

Globally, financial markets see the debate on U.S. regulation as crucial to how banks will be valued in the future, how much they may have to raise their capital and how much risk investors will be able to put on the table.

Signs -- most notably a suit against Goldman Sachs -- that the crackdown in the United States would target financial institutions, drove stock markets worldwide lower earlier this month. Markets were preoccupied with debt troubles in Europe on Tuesday, putting aside the regulation battle.

President Barack Obama and the Democrats want to tighten the rules on banks and capital markets to prevent a repeat of the 2008-09 financial crisis, which tipped the economy into a severe recession and unleashed reform efforts worldwide.

Many Republicans agree on the need for reform, but say the bill is an overreach by government and would unwisely separate banking supervision from consumer protection laws designed to shield Americans from abusive mortgages and credit cards.

The House of Representatives approved a bill in December that embraced many reform proposals made in mid-2009 by Obama. Anything the Senate produces would have to be merged with the House bill. Analysts have said that could happen by mid-year.

REPUBLICANS OBJECT TO FUND

Republicans have said the bill goes too far in regulating derivatives and in setting up a $50-billion fund to finance the orderly liquidation of large financial firms in distress.

Senator Richard Shelby, the lead Republican negotiator, said he had made considerable progress on that issue in talks with Democratic Senator Christopher Dodd. But he said Dodd's consumer-protection proposal was too aggressive.

It would be so sweeping in scope and breadth it would reach into everything our economy is about, he said at a news conference.

Dodd said that widespread abuses in the mortgage market had proven the need for consumer protection.

I find it rather startling that in this day and age they're objecting to the idea that the American consumer ought to be protected, Dodd told reporters.

The two had met earlier in the day and were expected to meet again after the afternoon vote.

The reform bill stumbled on Monday in its first test vote in the Senate, after months of bipartisan debate and more than two years since the collapse of Wall Street giant Bear Stearns ushered in the worst banking debacle since the 1930s.

Republicans unanimously voted to block debate on the bill. They were joined by Nelson of Nebraska. He said on Tuesday he voted against the bill because it would force companies to hold collateral against existing derivatives contracts.

The Senate bill would set up a new orderly liquidation process for dismantling large financial firms in distress; create a new financial consumer protection watchdog; impose regulations on the over-the-counter derivatives markets; curb risky trading by banks; force hedge funds to register with the government; and crack down on debt securitization.

Democratic Senator Robert Menendez said at a news conference that the procedural votes would make it harder for Republicans to resist an initiative popular with voters.

As the spotlight gets riveted on Wall Street reform ... that will create pressure, he said. At the end of the day, I think this is political dynamite. Republicans have lit the match and they have time to put it out before it explodes.

(Additional reporting by Thomas Ferraro; editing by Patrick Graham)

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