Major US financial reform agreed
The US Congress has all but finalised the biggest reform of US financial regulation since the Great Depression.
President Barack Obama said the reforms would "hold Wall Street to account".
Legislators stayed up all of Thursday night for 19 hours of non-stop negotiations to reconcile separate versions of the bill that had been passed by the two houses of Congress.
Agreement was reached to impose strict limits on banks' ability to take risky speculative bets on markets.
End Quote Mark Mardell BBC North America editor
It will be a political tool for Obama. He's trying to take the initiative after a difficult few months”
Speaking before the start of the G8 and G20 summits in Canada, President Barack Obama said he was "gratified" by the progress made by Congress.
Treasury Secretary Tim Geithner said the bill that had emerged was "strong" and described it as "the most sweeping set of financial reforms since those that followed the Great Depression".
US bank shares greeted the news positively, with Citibank rising 3% in early trading, Goldman Sachs was up 1.75% and JP Morgan 2.25%.All-nighter
The debate only ended at 0540 Washington time (0940 GMT), with compromises reached on all major points.
The bill represents a second major legislative victory this year for President Obama - following healthcare reform - and rode a popular backlash among American voters against Wall Street.
"We worry about big money," said Democrat Barney Frank, who headed the negotiations.
"I worry about big money having a corrupting influence, but it is reassuring to know that when public opinion gets engaged, it will win."Volcker rules
The bill introduces the so-called Volcker rule - named after the former Federal Reserve chairman Paul Volcker, who proposed it.
The rule is intended to ban banks from risky entanglements in the financial markets.
US banks will be barred from taking big trading bets on markets.
They will also be limited to investing a maximum of 3% of their capital in speculative businesses such as hedge funds or private equity funds.
The bill will also set up a powerful consumer financial protection bureau, with powers to clamp down on abusive practices by credit card companies and mortgage lenders.
It now has to be passed by both the Senate and the House. When asked whether this would happen, President Obama said, "you bet".Sticking points
Make no mistake, some on Wall Street feel they've dodged a bullet.
However much their revenues will be hurt by the new laws' provisions, things could have been much worse. Fuelled by deep public rage at banks that nearly destroyed the US economy, lawmakers seriously considered much more drastic action than this.
The Brown Kaufman amendment in the Senate would have limited the size and leverage of banks. Needless to say the giants of Wall Street were appalled at that prospect.
And who helped kill that amendment? The Obama administration itself. So it's worth bearing in mind that up to a point he has actually also been Wall Street's protector.
Mr Obama said the final bill "represents 90% of what I proposed when I took up this fight".
But concessions had to be offered in order to win over Republican backing for the deal.
The US Congress is dominated by President Obama's Democratic party, which holds majorities in both houses.
However, following the death of Edward Kennedy last year, Republicans won his Massachusetts seat in the Senate, giving them a crucial blocking minority there.
Indeed, the 3% permitted investment in speculative businesses was a dilution to the Volcker Rule demanded by the new Massachusetts senator, Scott Brown.
Agreement was also reached on higher capital requirements for banks.
This means banks will either need to do less risky lending, or they will have to raise more money from shareholders to hold in reserve against loan losses, or both.
However, congressmen conceded a five-year transition period for banks to meet the new capital rules, and they exempted smaller banks - with less than $15bn in assets - from the rules altogether.Swap limits
- Volcker rule: ban on banks' proprietary trading
- Volcker rule: limit on banks investing in hedge funds or private equity funds
- New Consumer Financial Protection Bureau
- Credit Default Swaps trading moved onto exchanges
- Banks to spin off certain swaps businesses
- New capital adequacy rules for big banks in five years
- New Council of Regulators to monitor systemic risks
- Regulator powers to seize and resolve big troubled banks
Another major sticking point was a Senate proposal to ban banks from dealing in so-called swaps.
Swaps are a type of derivative - financial contracts once described by investor Warren Buffett as "financial weapons of mass destruction".
Under the Senate bill, banks would have been forced to spin this business off into separate affiliated companies, in order to protect them from losses.
But negotiators agreed to water down the Senate bill, exempting the biggest swaps markets - on interest rates and currency exchange rates - from the ban.
But banks will still be banned from dealing in credit default swaps unless they do so through the safety of a financial exchange.
This measure will severely curtail one of the most profitable activities of the big international banks when they do business in the US.