The administration released a 14-page outline that would require higher capital cushions for firms deemed to be so large and interconnected they pose a threat to the overall stability of the financial system.
Treasury Secretary Timothy Geithner is slated to discuss the U.S. proposals during two days of meetings in London among the Group of 20 nations that begin Friday.
Under Geithner's proposal, a comprehensive international agreement should be reached by the end of 2010 with countries agreeing to implement the measure by the end of 2012. The administration is hoping to get broad agreement among major countries on raising capital standards so that financial institutions in the United States wouldn't be put at a disadvantage if capital standards in the U.S. are raised to higher levels than their competitors face in other nations.
Many experts believe the crisis occurred at least in part because current bank regulations don't impose strict enough requirements for the reserves a bank must hold to cover potential loan losses.
"The global regulatory framework failed to prevent the buildup of risk in the financial system in the years leading up to the recent crisis," the Treasury Department said in a statement issued Thursday. "... Going forward, global banking firms must be made subject to stronger regulatory capital and liquidity standards that are as uniform as possible across countries."
Treasury said the new principles "should guide reform of the international regulatory capital and liquidity framework to better protect the safety and soundness of individual banking firms, and the stability of the global financial system and economy."
Under the proposed policy, capital requirements for all banks and financial firms would be increased while those for firms deemed to be systemically risky would have higher required capital levels than the others.
Banks and financial firms would be subject to conservative, detailed standards for the amount of cash they are required to hold.
The rules for measuring risks in banks' portfolios and the capital needed to protect against them would be improved.