It is the first major bid to overhaul the highly complex US financial regulatory network since a home mortgage meltdown shook the foundation of the system and sent markets into a tailspin across the globe.

Officials told a media briefing that the US leader would propose a Financial Services Oversight Council led by the Treasury Department to oversee supervision of the financial system.

The plan is also to make the Federal Reserve the centralised supervisor of large banks and other key financial institutions, officials said.

The Office of Thrift Supervision - a federal bank regulator and supervisor - will be abolished under the reform proposals, the officials said. The agency came under fire for the near collapse of insurance giant AIG, which was eventually bailed out by the government for US$180 billion (S$262 million) , and the failure of Washington Mutual, the biggest bank to fail in US history.

US investment banking icon Lehman Brothers had also collapsed at the height of the financial turmoil in September.

A senior administration official said the financial oversight council would 'help fill gaps in supervision and facilitate coordination of policy and identify emerging risks.'

The so called 'tier one' financial holding companies will be 'subject to more exacting supervisory requirements and capital standards'. Currently, the Federal Reserve, the Federal Deposit Insurance Company, the Office of the Controller of the Currency and the Office of Thrift Supervision all oversee the financial industry.

President Obama also wants to set up a federal consumer financial protection agency to shield Americans from predatory practices from credit card firms, banks and mortgage markets under the revamp. The planned Consumer Federal Protection Agency will cover credit, savings and other payment markets.

He will also propose to impose stringent capital and liquidity requirements for the largest and most 'interconnected' financial firms, officials said. - AFP.