US president Barack Obama laid out his vision for reshaping US financial regulation on Wednesday, aiming to tighten oversight of large firms whose excessive risk-taking triggered a global economic slump.

The proposals, under development over the past six months are headed next for debate in the US Congress and include closing one bank regulator and creating government watchdogs for big-picture economic risk and financial product safety.

The administration takes on tough jobs in the plan, such as forcing large firms to boost their capital cushions and imposing regulations on over-the-counter derivatives and securitized instruments.

But it only partially tackles one task once seen as vital - a top-to-bottom revamp of existing financial regulatory agencies.

No merger of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is being proposed, for instance, due largely to political obstacles.

'With the reforms we are proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse,' Obama said in remarks prepared for delivery later on Wednesday.

'We seek to create a framework in which markets can function freely and fairly, without the fragility which in normal business cycles bring the risk of financial collapse, a system that works for businesses and consumers,' he said.

Obama calls for putting the Federal Reserve in charge of monitoring 'systemic risk' to the economy that may be posed by the largest financial firms, with the aim of preventing a repeat of the banking and capital markets crisis of the past year.

Months of congressional debate loom. Senate and House of Representatives committees will hold more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered a rival plan.

Obama will deliver his remarks at 12.50pm EST, seeking to defend the plan as a balanced approach that restrains excessive risk, but doesn't clamp down so hard that firms would be prevented from helping drive economic growth.

The president and his top economic advisers see the current financial upheaval as the latest in a series of crises going back decades, so their regulatory reform intends to correct problems beyond just those blamed for the latest episode.

Closing thrift office

As detailed in an 88-page document, the Obama plan calls for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the objective of streamlining bank supervision.

In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial system, working in conjunction with a council of other regulators to be chaired by Treasury.

The goal is to make sure a failure of one company - like bailed-out mega-insurer American International Group, for instance - does not destabilize the broader economy.

Obama will call for establishment of an independent consumer financial products watchdog agency, and for requiring financial firms to hold more capital so they can better survive tough times.

More transparency and accountability would be mandated for exotic financial markets, which in recent years expanded far beyond the government's ability to keep track of them.

Under the plan, the government would be empowered to seize and unwind large, troubled companies that are not banks, modeling the process on the Federal Deposit Insurance Corp's existing power to unwind failing banks.

The administration also will urge reining in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds.

It will push for changes i