FACTBOX-Major US financial regulation initiatives

June 22 (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 on June 17 unveiled a broad reforms package, covering some of the major issues listed below.

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

SYSTEMIC RISK REGULATION

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

The Fed would monitor systemic risk, under the Obama plan, 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 Treasury secretary and include the Fed chairman; the director of the new National Bank Supervisor; the director of the new Consumer Financial Protection Agency; the chairman of the Securities and Exchange Commission (SEC); the chairman of the Federal Deposit Insurance Corp (FDIC); 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.

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.

There is already legislation in Congress to set up a Financial Product Safety Commission.

BANK REGULATION

Bank regulation would be streamlined, under the Obama plan. A new National Bank Supervisor would take over the functions of both the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which are Treasury units.

The Obama plan would eliminate the charter for thrifts that underlies the U.S. savings and loan industry.

Some lawmakers want more consolidation of banking supervision than the administration has proposed.

CAPITAL AND LIQUIDITY STANDARDS

Financial institutions would have to strengthen their capital cushions to absorb losses when times are tough, and make themselves more liquid, or able to move quickly in and out of various holdings, "with more stringent requirements for the largest and most interconnected firms," under the plan.

This part of the plan has broad international implications, with the European Union eyeing similar changes.

SECURITIZATION

Issuers of asset-backed securities would face new reporting requirements and be required to keep at least 5 percent of the performance risk in loans they securitize, under the plan.

Transactions would be more standardized and regulators would expand electronic trade reporting, while compensation of securitizers would be linked to long-term performance and the interests of borrowers and investors.

Sponsors of securitizations would have to stand behind securitized products sold to investors with warranties.

The 5-percent skin-in-the-game mandate was included in a bill already approved by the House and now languishing in the Senate, complicating handling of this part of the Obama plan.

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

CREDIT RATING AGENCIES

Reliance by regulators on credit rating agencies would be reduced by changing some legal rules covering debt issuance that encourage the use of credit ratings under the plan.

The SEC is already considering reforms of 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).