FACTBOX: Major U.S. financial regulation initiatives

(Reuters) - The Obama administration on Tuesday sent Congress its proposal for the creation of a Consumer Financial Protection Agency, part of a wide-ranging plan by the administration to tighten U.S. financial regulation to prevent another banking and market crisis.

If enacted, the changes would change the way banks, hedge funds, exchanges and other segments of the financial services industry do business.

Firms whose business models could be at risk under the proposed changes are listed below under "political risk exposure."

The broad proposal was unveiled by the administration on June 17 and covered some of the major issues listed below:

SYSTEMIC RISK REGULATION:

The Obama administration is proposing to put the Federal Reserve in charge of supervising systemically important and interconnected firms.

Under the Obama plan, the Fed would monitor systemic risk together with a council of regulators that would replace the President's Working Group on Financial Markets. The council would help identify firms to be regulated by the Fed.

It would be led by the secretary of the Treasury and include the Fed chairman, the director of a new National Bank Supervisor, the director of a new Consumer Financial Protection Agency, the chairman of the Securities and Exchange Commission, the chairman of the Federal Deposit Insurance Corp and the director of the Federal Housing Finance Agency.

RESOLUTION AUTHORITY:

A federal government mechanism would be set up for "orderly resolution of any financial holding company whose failure might threaten the stability of the financial system" under the Obama plan.

Draft legislation for this "resolution authority" has already been proposed by the administration, giving the FDIC this new duty. Republicans are countering with a proposal to create a new chapter in the bankruptcy code.

CONSUMER, INVESTOR PROTECTION:

An independent Consumer Financial Protection Agency would be formed under the Obama plan to oversee products ranging from mortgages to credit cards. It would be mandated to promote transparency, simplicity, fairness, accountability and access in the market for financial products and services.

The agency would be able to prescribe rules and would have supervisory and examination authority for consumer compliance, taking away these powers from current bank regulators. It could enforce compliance with orders and penalties. For details, see [ID:nN30438968]

The agency could require securitized loan originators to retain 5 percent of credit risk, while it would also define standards for "plain vanilla" financial products.

It would establish a consumer and investor protection council made up of heads of the SEC, the Federal Trade Commission, the Justice Department, the Consumer Financial Protection Agency and other agencies.