An influential US Senate committee has proposed a sweeping overhaul of the country’s regulatory architecture that would strip powers from the Federal Reserve and create a single banking regulator.

Chris Dodd, chairman of the Senate banking committee, on Tuesday presented a more radical vision of regulatory reform than that proposed by the Obama administration. The move ushered into the open a behind-the-scenes struggle between banks, policymakers and regulators.

Democrats lined up behind Mr Dodd as he presented the bill. But senior Republicans were missing from a press conference in spite of attempts by President Barack Obama to secure their support for one of his most important legislative goals.

The proposal to consolidate regulators faces strident opposition from the Fed, the Federal Deposit Insurance Corporation and smaller regulators, which argue they are best placed to supervise banks.

Mr Dodd said most institutions should benefit from a regulator that would provide “clarity, cut red tape and make it easier to compete”, but banks would “no longer be able to shop for the weakest regulator”.

Viral Acharya, professor of finance at the Stern School of Business at New York University, said he thought the idea of a single bank regulator was a bad one. “I think it’s going to be too huge an overhaul of what exists,” he said. The Fed and FDIC needed to keep supervisory functions in order to inform their other roles, he argued.

Financial regulation reform

Our interactive graphic explains the existing framework and proposed changes to financial regulation in the EU, US and UK

An Obama administration official said last week that he was open to the idea of consolidating bank regulators even though that went much further than initial plans from the Treasury.

The Senate draft legislation also creates an agency to oversee systemic risk, which could call for banks to be broken up if they threatened the entire financial system and impose tougher capital requirements.

The draft legislation, although more radical than other versions, stops short of forcing the break-up of healthy banks, which has been advocated by some economists.

Republicans declined to support the proposed legislation, with a proposed Consumer Financial Protection Agency – which Mr Dodd said was vital to crack down on abusive selling of mortgages and credit cards – proving an insurmountable obstacle.

Mr Dodd said he was still “optimistic” that the Republicans could be brought back on board as the bill starts its formal mark-up in the first week of December. But even with a change of heart from Republican senators there is now little chance of Mr Obama signing financial reform into law this year.