Chairman of the U.S. Senate Banking Committee, Chris Dodd, released his regulatory reform proposal on Monday, calling for broad changes to financial industry regulation in the U.S.

The proposed reforms would create a new consumer watchdog housed at the U.S. Federal Reserve Board, consolidating the consumer protection responsibilities of numerous regulatory agencies; raise capital requirements and leverage limits on banks, and introduce a new resolution authority to limit moral hazard; establish a council of regulators to watch for systemic risks; require non-binding votes on executive compensation; introduce new rules for credit rating agencies; adopt the so-called Volcker Rule to separate banks from proprietary trading, hedge funds and private equity funds; and, require more transparency in the derivatives market, the securitization market, and from hedge funds.

It also imagines reforms at the U.S. Securities and Exchange Commission, including the move to a self-funded SEC; encouraging whistleblowers by offering rewards of up to 30% of funds recovered; and, studying whether brokers who give investment advice should be held to the same fiduciary standard as investment advisors.

The prospects for the actual passage of reform remains somewhat uncertain due to the fact that Dodd announced last week that he had given up on crafting a bipartisan bill with his committee’s Republican members, and the fact that powerful industry lobbyists oppose some of its measures.

“Chairman Dodd has unveiled a bill which we believe hits the right notes on some aspects, like too-big-to-fail and streamlining of bank regulation,” said, Steve Bartlett, president and CEO for the Financial Services Roundtable, an industry lobby group. “The Roundtable believes that consumer protection should not be separated out from the regulators which govern the products. We are concerned with the autonomous authority given to such an entity.”

“We continue to urge lawmakers to reach a bipartisan bill to modernizing our regulatory framework and protect consumers,” he added.

Wall Street lobby group, the Securities Industry and Financial Markets Association, also noted that it has reservations about the proposals, but expressed support for reform. “We hope today’s announcement by Senator Dodd brings us another step closer to enacting the reforms that are vital to strengthening our financial system, this year. We remain committed to supporting responsible reform,” said SIFMA president and CEO, Tim Ryan.

“The industry has been, and continues to, support reforms that protect against systemic risk, end the notion of ‘too big to fail,’ and never again put American taxpayers on the hook. While we may disagree on certain specific policy details, we should not let it distract us from the overall goal of reforming the system. We look forward to working with the Senate as this legislative process continues,” he added.

IE