Factbox: Keys to financial regulation reform in Senate

(Reuters) - A revised bill on financial regulation reform will be released soon in the Senate from Democratic Banking Committee Chairman Christopher Dodd.

The bill will be the next step in a long push by the Obama administration and congressional Democrats to tighten bank and capital market oversight.

The Senate version will be narrower than one approved in December by the House of Representatives, which was itself pared back from reforms proposed by President Barack Obama in mid-2009.

Below is a look at some of the probable contours of the Dodd legislation and its prospects, based on discussions with lawmakers, congressional aides and lobbyists:

* RESOLUTION FUND

To put an end to the assumption that some financial firms are "too big to fail," Dodd will propose a new government process for shutting down large, troubled firms.

With the aim of avoiding debacles like the 2008 collapse of former Wall Street titan Lehman Brothers and bailout of former insurance giant AIG, Dodd will propose empowering regulators to seize distressed firms and unwind them in a bankruptcy-like process. He may call for creating a $50 billion fund to help pay for such wind-downs.

* CONSUMER PROTECTION

Dodd is expected to call for creating a financial consumer protection watchdog as a unit of the Federal Reserve, rather than as an independent agency.

Obama last year proposed an independent Consumer Financial Protection Agency to regulate credit cards and mortgages.

The independent agency approach was endorsed by the House in its bill in December. Dodd backed it as well, in November when he unveiled a draft package of financial reforms, but Republicans have refused to consider the idea.

Dodd explored putting the watchdog inside the Treasury Department or the Federal Deposit Insurance Corp, but the Fed option seems to have the most support as a compromise.

* BANK SUPERVISION

Dodd is expected to call for a modest revamp of the patchwork U.S. bank supervision system that gives the Federal Reserve a major role in a change from earlier proposals.

His latest approach would let the Fed keep oversight of large bank holding companies with assets exceeding $50 billion. That would cover about 44 major firms, including giants already under the Fed's regulatory supervision, such as Citigroup and Bank of America.

The Fed may also retain power over state-chartered banks in the Fed system with less than $50 billion in assets. An earlier proposal had the Fed surrendering that job to the FDIC, but that idea encountered resistance from the Fed and some Republicans.

Nationally-chartered banks would remain under the supervision of the Office of the Comptroller of the Currency, which would also absorb the Office of Thrift Supervision, a unit that polices savings and loans and that is closing.

The House bill approved in December called for closing OTS and merging it into OCC, but it preserved the Fed's and the FDIC's traditional bank supervision roles.

* VOLCKER RULE

Obama's January proposal to ban proprietary trading at banks looks set to get into legislation only in reduced form, although five Democratic senators introduced a bill on March 10 that would not only enact the rule but widen it.

Dodd will probably have language in his bill that empowers regulators to order restructuring moves at large firms in distress. That could include shutting down proprietary trading desks as well as hedge fund and private equity operations, like those targeted by the rule proposed by the president and White House economic adviser Paul Volcker.

Similar language is already included in the House bill.

Legislation has been introduced in the Senate to apply the rule to banks and large nonbank financial institutions.

* OVER-THE-COUNTER DERIVATIVES

Imposing a new set of rules on the unpoliced $450 trillion OTC derivatives market, including credit default swaps, is a provision "that's got to be" in the bill, Dodd has said.

Obama has called for forcing as much traffic as possible in the market through exchanges, equivalent electronic trading platforms or, at least, central clearinghouses.

The handful of Wall Street firms -- Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and Morgan Stanley -- that dominate the market have fought increased oversight.

The House bill included new regulations for OTC derivatives, but exempted a wide range of end-users of the financial contracts from mandatory central clearing. The draft unveiled by Dodd in November a narrow scope for exemptions.

* EXECUTIVE PAY AND SHAREHOLDER RIGHTS

Two senators, Democratic Senator Charles Schumer and Republican Senator Mike Crapo, assigned by Dodd to work out a bipartisan compromise on these issues have so far failed to do so.

They are in a deadlock, the details of which are unclear.

The dispute threatens proposals that would give shareholders more say on executive pay, more clout in electing directors and more compensation committee independence.

The House bill called for letting shareholders cast annual, non-binding votes on executive pay.

The House also endorsed empowering the Securities and Exchange Commission to write rules giving shareholders access to proxy statements for nominating corporate directors.

* SYSTEMIC RISK REGULATION

Most Democrats and Republicans agree on the need for a new regulator to monitor the financial landscape and spot threats to stability before they worsen and cause the next crisis.

The idea of a council of agency heads to do this has wide support, despite reservations within the administration, which proposed last year that the Fed take on the job.

The House bill proposed an inter-agency council chaired by the Treasury, with the Fed as its chief policy agent.

Dodd will likely also recommend a systemic risk council. His inclination to make the Treasury secretary the council's chairman faces some resistance from lawmakers who fear the secretary could politicize the council.

* HEDGE FUNDS

The Dodd bill is likely to require hedge funds to register with the government, but not venture capital funds or private equity funds, as Dodd had proposed in November.

The House bill called for registration of hedge funds worth $150 million or more. Dodd's cut-off level was $100 million.

The House bill exempted venture capital funds from full registration, while specifically requiring registration by offshore funds, while the Dodd bill did not.