Factbox - Comparing EU and U.S. financial reform

LONDON (Reuters) - U.S. Congress approved the most sweeping reform of Wall Street since the 1930s on Thursday and President Barack Obama will sign it into law next week.

It implements pledges the United States, the European Union and other leading countries in the Group of Twenty made in 2009 to help avoid a repeat of the worst financial crisis since the Great Depression.

The pressure is now on the EU to play catch-up in key areas of derivatives, supervision, hedge funds, consumer protection and resolution. Banks are watching carefully as trans-atlantic differences are emerging that will affect business models.

The following compares U.S. and EU reforms:

PREVENTING MORE TAX-FUNDED BAILOUTS

* The G20 wants to end the belief among banks they are "too big to fail" by requiring resolution mechanisms and "living wills" for speedy windups that don't destabilise markets.

* The U.S. law sets up an "orderly liquidation" process that the government could use in emergencies, instead of bankruptcy or bailouts, to dismantle firms on the verge of collapse.

* The EU, a collection of 27 states with no common insolvency laws, faces a harder task in thrashing out a pan-EU mechanism even though cross-border banks dominate the sector.

* EU executive European Commission has proposed a network of national resolution funds and a levy. Internal splits over what to do with money raised, also no agreed policy on who bails out a cross-border bank.

* Winners/Losers: Banks in EU face an extra levy on top of higher capital and liquidity requirements. Taxpayers should be better shielded. Messy patchwork for global banks who will come under pressure to "subsidiarise" operations in different countries.

OVER-THE-COUNTER DERIVATIVES

* The G20 agreed that derivatives should be standardised where possible so they can be centrally cleared and, if appropriate, traded on an exchange by the end of 2012.

* Wall Street firms will have to spin off dealing operations in some swaps, but can keep many swaps in-house, including derivatives to hedge their own risk. Much of OTC derivatives trading will be redirected through more accountable channels such as exchanges and clearinghouses. Many OTC contracts end-users will be able to carry on as before.

* The EU proposes its draft law on derivatives in September and will focus on mandatory clearing of contracts and reporting of trades. It is less fixated on mandatory exchange trading and won't look at the issue until later in the year. It has no appetite so far to force structural changes on bank swap desks.

* EU, as the United States did, likely to agree some softening for companies who use derivatives to hedge but could be differences in scope.

* Winners/Losers: Global banks could shift some trading from the United States to the EU but their margins in derivatives will be hit in any case. Corporates face costlier hedging as there will be heavier capital charges on uncleared trades but differences in exemption scope could be exploited.

BONUSES

* The G20 has introduced principles to curb excessive pay and bonuses, such as requiring a big chunk of a bonus to be deferred over several years, with a clawback mechanism.

* United States and EU are applying these principles and taking their own actions, such as a one-off tax in Britain.

* The EU is approving what are likely to be the toughest curbs in the world on how pay packages are structured by setting more specific targets than in the G20 principles.

Winners/Losers: Harder to justify big bonuses in future.

CREDIT RATING AGENCIES

* The G20 agreed that ratings agencies should be required to register, report to supervisors and show how they manage internal conflicts of interest.

* U.S. bill in line with G20 pledge.

* An EU law to this effect comes into force this year. It will also introduce pan-EU supervision and make it easier for new entrants to compete.

* Winners/Losers: Ratings agencies will have to justify what they do much more in future. The "Big Three" -- Fitch, S&P and Moody's may face more competition in the EU. The sector faces more efforts to dilute their role in determining bank capital requirements.

CONSUMER PROTECTION

* The U.S. bill set ups a new bureau in the Federal Reserve to regulate mortgages and credit cards. The watchdog has sharp teeth, but won't be able to bite car dealers, who won an exemption.

* The EU's Commission has just proposed higher protections on bank deposits and higher compensation for victims of malpractice in financial services. Britain planning to create a new Consumer Protection and Markets Authority by 2012.

Winners/Losers: consumers should have tougher protections but financial services firms face higher payouts when things go wrong.

HEDGE FUNDS/PRIVATE EQUITY

* The United States and EU working in parallel to introduce G20 pledge to require hedge fund managers to register and report a range of data on their positions.

* U.S. law in line with G20.

* The EU going further by including private equity and requiring third-country funds and managers to abide by strict requirements if they want to solicit European investors, a step the United States says is discriminatory.

* Managers of alternative funds in the EU would also have curbs on remuneration, an element absent from U.S. reform.

* Winners/Losers: U.S. hedge fund managers may find it harder to do business in the EU. European investors may end up with less choice. Regulators will have better data on funds. EU managers may decamp to Switzerland, though also for tax reasons.

BANKS TRADING

* There will be a new U.S. "Volcker" rule -- not included in G20 pledges -- that bars proprietary trading by banks for their own accounts unrelated to customers; limits the growth of the biggest banks; and curbs banks' involvement in private equity and hedge funds, except for small investments allowed by a loophole added to the rule late in debate.

* Key EU states against copying the Volcker rule as they want to preserve their universal banking model.

* Winners/Losers: Some trading could switch to the EU from the United States inside global banks.

SYSTEMIC RISK

* The G20 wants mechanisms in place to spot and tackle system-wide risks better, a core lesson from the crisis.

* A U.S. council of regulators chaired by the secretary of the Treasury would be created to monitor big-picture risks in the financial system.

* The EU is in the final stages of approving a reform that will make the European Central Bank the hub of a pan-EU systemic risk board but plans for three new pan-EU supervisors to oversee insurers, markets and banks face opposition from Britain.

* Winners/Losers: ECB a big winner with an enhanced role that many see as a platform for a more pervasive role in future. Banks will have yet another pair of eyes staring down at them.

BANK CAPITAL REQUIREMENTS

* The push to beef up bank capital and liquidity requirements is being led by the global Basel Committee of central bankers and supervisors which is toughening up its global accord as requested by the G20 to take effect from the end of 2012 over several years.

* The U.S. bill directs regulators to increase capital requirements on large financial firms as they grow in size or engage in riskier activities.

* The EU is approving new rules to beef up capital on trading books and allow supervisors to slap on extra capital requirements if remuneration is encouraging excessively risky behaviour. It will debate a further set of rules at the turn of the year to toughen up definitions of capital and introduce leverage caps.

* Winners/Losers: Bank return on equity set to be squeezed. Regulators will have many more tools to control the sector. Higher costs likely to be passed on to consumers, investors.

FIXING SECURITISATION

* The U.S. bill forces securitizers to keep a baseline five percent of credit risk on securitised assets. The EU has already approved a law to this effect.

* Winners/Losers: banks say privately the 5 percent level is low enough not to make much difference and that key problem is restoring investor confidence into the tarnished sector.

(Reporting by Huw Jones; Editing by Ruth Pitchford)