Factbox: Highlights of financial regulation reform bill

WASHINGTON Wed Jul 21, 2010 12:22pm EDT

WASHINGTON (Reuters) - President Barack Obama on Wednesday signed a sweeping overhaul of the financial regulatory system. Following is a brief look at the bill's main provisions:

SWAPS PUSH-OUT: Wall Street firms that dominate the $615 trillion over-the-counter derivatives market will have to spin off dealing operations in some swaps, but can keep many swaps in-house, including derivatives to hedge their own risk.

Much of OTC derivatives trading will be redirected through more accountable channels such as exchanges and clearinghouses. Many OTC contracts end-users will be able to carry on as before.

VOLCKER RULE: A new rule will bar proprietary trading by banks for their own accounts unrelated to customers; limit the growth of the biggest banks; and curb banks' involvement in private equity and hedge funds, except for small investments allowed by a loophole added to the rule late in debate.

Some big banks' profits will be pinched by both the Volcker rule and the Lincoln swaps plan, with a few Wall Street giants potentially facing structural changes.

WALL ST 'DEATH PANEL': Aiming to prevent massive bailouts like AIG's and disastrous bankruptcies like Lehman Brothers', the bill creates a new government "orderly liquidation" process for financial firms on the verge of collapse.

Authorities will be able to seize and liquidate them, with costs covered by sales of assets and fees on other firms if needed.

CONSUMER WATCHDOG: Protection of financial consumers will be enhanced by increased government regulation.

The bill will set up a new bureau in the Federal Reserve to regulate mortgages and credit cards. The watchdog has sharp teeth, but won't be able to bite car dealers, who won an exemption.

THE BIG PICTURE: A new council of federal regulators will try to monitor the entire financial forest, not just the trees. High-risk firms can be singled out for stricter policing.

BEHIND THE HEDGE: Private equity and hedge funds will have to register with regulators and open their books to scrutiny. Not so for venture capital funds, which are exempt.

INSURANCE COPS: The first federal monitor for state-policed insurers will be formed. It's not federal regulation -- yet.

BANK CUSHIONS: Banks will have to set aside more capital to ride out tough times, but will get several years to comply.

FED SCRUTINY: The Fed's emergency lending during the crisis will be reviewed, but not its decisions on interest rates.

DEBIT CARDS: Fees charged on debit card transactions will be reduced -- a victory for retailers over the banks.

(Reporting by Kevin Drawbaugh, Rachelle Younglai, Kim Dixon, Andy Sullivan, Roberta Rampton and Charles Abbott, editing by Anthony Boadle & Theodore d'Afflisio)