FACTBOX: Major US financial regulation initiatives

(Reuters) - The Obama administration and congressional Democrats are moving to tighten U.S. financial regulation to prevent another banking and market crisis.

Changes will affect banks, hedge funds, exchanges and other segments of the financial services industry. The administration is expected to unveil a comprehensive reforms package on June 17, covering some of the major issues listed below. Firms whose business models could be at risk under various proposed changes are listed in each section under "political risk exposure":

BANK REGULATION:

The Obama administration has been eyeing a plan to create a single government agency to regulate all banks.

But that approach may be losing traction in the face of the politically difficult task of consolidating four existing federal banking regulators.

Some lawmakers see the possibility of merging the Office of Thrift Supervision with the Office of the Comptroller of the Currency. Both are Treasury Department units.

Another option is moving some of the Federal Reserve's and the Federal Deposit Insurance Corp's bank supervision duties into the newly merged entity.

OTC DERIVATIVES:

The administration has proposed cracking down on over-the-counter derivatives with a plan to move more trading onto exchanges or into clearinghouses, supervise dealers more closely, and make this opaque market more transparent.

The proposal will likely be linked to the systemic risk regulator plan. The scope of OTC derivatives reform will be decided by definitions such as which derivatives are "standardized" and which are "customized," as well as which are moved onto exchanges, which to central clearinghouses, and which are only subjected to increased disclosure.

Political risk exposure: JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup (C.N), Goldman Sachs (GS.N), CME Group Inc (CME.O), IntercontinentalExchange (ICE.N).

SYSTEMIC RISK REGULATOR:

The Obama administration wants to establish a government entity to monitor systemic risk in the economy, with the idea that it could head off future crises. No single agency is now designated to do this. The Fed had been favored initially for the task, but many lawmakers are skeptical of its abilities.

Recently the administration and key congressional Democrats have said they are also open to the idea of forming an interagency council on financial stability. The end result could be a combination of the two approaches.

UNWINDING FAILING FIRMS:

The administration has sent Congress a draft "resolution authority" bill to empower the government to seize and unwind large, failing financial firms that are not banks. No clear procedure for this exists at present.

The FDIC, which already seizes and unwinds failed banks, may get the nod for this new authority. But Republicans are countering with a proposal to create a new chapter in the bankruptcy code.

FINANCIAL PRODUCTS SAFETY COMMISSION

The administration is expected to propose creation of a U.S. agency to protect consumers who use financial products.

The proposal has been offered as a bill in Congress. It would set up a Financial Product Safety Commission, similar to the U.S. Consumer Product Safety Commission, for products ranging from mutual funds to mortgages.

HOUSING, MORTGAGES AND SECURITIZATION:

The House of Representatives on May 7 approved a bill to force mortgage lenders to keep 5 percent of loans they securitize, tighten mortgage broker oversight and protect borrowers. That measure is now languishing in the Senate.

The securitization component of the House bill may be included by the administration in its overall package.

Political risk exposure: Citigroup, Wells Fargo (WFC.N), Bank of America, JPMorgan.

EXECUTIVE PAY:

U.S. officials are looking at ways to force reforms in financial industry pay practices to discourage excessive risk-taking. A pay provision is expected to be included in the administration's reforms package.

The administration on June 10 named Kenneth Feinberg as its pay czar to police the compensation of top employees at companies receiving "exceptional" aid from the government. It also urged giving shareholders more say on setting executive salaries, a long-cherished goal of investor rights activists.

Keywords: FINANCIAL REGULATION/

HEDGE FUNDS, PRIVATE EQUITY:

Lawmakers have introduced several bills in Congress to give the Securities and Exchange Commission authority to require hedge funds to register with the agency.

The Treasury wants advisers to hedge funds, private equity funds and venture capital funds, whose assets under management exceed a not-yet-determined level, to register with the SEC.

Political risk exposure: Bridgewater Associates, D.E. Shaw Group, Farallon Capital Management, Citadel Investment Group, Fortress Investment Group (FIG.N), many others.

SHORT-SELLING:

The SEC will meet soon to finalize an interim rule that requires large short sellers to disclose their positions to the agency. It is unclear if the agency will require the positions to be disclosed publicly.

The agency is also considering proposals to restrict short-selling, including restoration of an updated uptick rule, which allows shorting only when a stock's last sale price was higher than the previous price.

STUDENT LOANS:

President Barack Obama's 2010 federal budget proposed ending the federally-guaranteed student loan program and moving most of the country's $90 billion in student lending into the direct-loan program run by the Education Department.

The proposal is under review by Congress.

Political risk exposure: Sallie Mae (SLM Corp) (SLM.N), Student Loan Corp (STU.N), JPMorgan, Bank of America, ITT Educational Services (ESI.N), Corinthian Colleges (COCO.O).

BANK CAPITAL STANDARDS:

Regulators are expected to craft stricter capital standards for banks. Financial institutions will also face new liquidity requirements, about which bank regulators are expected to issue guidance during the first half of this year.

CREDIT RATING AGENCIES:

The SEC is considering reforms on potential conflicts of interest at credit rating agencies. Final action is likely months away.

Political risk exposure: Moody's Corp (MCO.N), Standard & Poor's (MHP.N), Fitch Ratings (LBCP.PA).

INSURERS:

Congress is studying changes to insurance industry oversight, but swift action looked unlikely with the industry deeply divided over whether to establish a national regulator to supplement the present state-based oversight system.

Political risk exposure: Allstate Corp (ALL.N), Travelers Cos Inc (TRV.N), Hartford Financial (HIG.N), MetLife Inc (MET.N), Prudential Financial Inc (PRU.N).

PROXY ACCESS:

The administration has urged the SEC to move forward on a proposal to give shareholders greater power to nominate corporate directors, a process now tightly controlled by company management. A final decision on the proposal will likely be made later this year.