The Bill would create the Financial Stability Oversight Council (FSOC) – as a nine-member inter-agency council – to monitor risks to the economy as a whole (that is, systemic-risks) and carry out related functions to promote financial stability. Significantly, the FSOC would be tasked with placing systemically-important non-bank institutions under Federal Reserve supervision to ensure that a future Lehman Brothers or AIG would be subject to "heightened", comprehensive supervisory scrutiny.

The Bill would provide for a special liquidation process as an alternative to the normal bankruptcy process for certain US financial companies considered systemically-important. The Bill uses the term "orderly liquidation" to emphasise the point that the troubled financial company is to be closed, rather than provided with assistance to remain open. Nonetheless, this aspect of the Bill has proven to be controversial as several Republicans have expressed concerns that certain provisions – including the establishment of a US$50 billion fund to cover liquidation costs – could leave open the possibility of a "back door" bailout.

The Bill would make changes to the regulatory and supervisory authority of the US federal banking agencies. For example, the Office of Thrift Supervision – which currently regulates federal savings banks and their thrift holding companies – would be consolidated into the Office of the Comptroller of the Currency – which regulates national banks. In addition, the Federal Reserve would lose its supervisory authority over certain US banks and smaller US bank holding companies. Arguably, these institutions are of less interest to the Federal Reserve from a systemic viewpoint and the reform would promote stability by allowing the Federal Reserve to focus on the largest organisations.

The Bill would establish the statutory framework for the US federal banking agencies to implement the so-called Volcker Rule – that is, President Obama's proposed restrictions on certain capital markets activities of, and concentration limits for, banking institutions and their affiliates. As currently drafted, the Bill would prohibit these institutions from:

Notably, however, the US federal banking agencies would have the authority to modify these restrictions based on the outcome of an FSOC study on how the Volcker Rule would impact the safety and soundness of banking institutions and financial stability.

The Bill would establish the Bureau as a new arm of the Federal Reserve for the purpose of better protecting the interests of consumers of financial products. The Bureau's supervisory reach would extend to certain types of bank and non-bank providers (including, residential mortgage originators) of consumer financial products such as deposits, residential mortgages and credit cards.

The Bill aims to enhance oversight and transparency of the derivatives market through both:

In view of concerns expressed by some Republican Senators, it is widely believed that certain aspects of the proposal – including the scope of the exemption from clearing requirements for transactions used to hedge commercial risks – could change on the Senate floor.

The Bill would eliminate the so-called "private adviser" exemption from US federal investment adviser registration currently available to advisers with fewer than 15 clients. As a result, additional hedge fund managers would likely become subject to a wide range of requirements – including, advertising, disclosure, conflict of interest, and reporting requirements – that apply to registered advisers.

For more information on this and other areas addressed by the proposed legislation, seeUS Senate Banking Committee Approves a Sweeping Financial Regulatory Reform Bill.