The Obama administration wants to force a wide range of large financial institutions to hold more capital as part of a sweeping regulatory overhaul that Tim Geithner, US Treasury secretary, on Thursday called the "new rules of the game".

Mr Geithner told Congress that the US needed a fresh approach to regulating risk that identified problems across the financial system as a whole if it were to prevent a repeat of the current financial crisis.

The heaviest demands would be placed on institutions deemed to be systemically important - ranging from large banks to insurance companies, financial groups such GE Capital and, potentially, hedge funds of sufficient size. But regulations would also be tightened for an even broader range of institutions and products, including over-the-counter derivatives.

Appearing on Thursday before the House financial services committee, Mr Geithner said "our system failed in basic fundamental ways" and needed "not modest repairs at the margin, but new rules of the game".

"The most simple way to frame it is: capital, capital, capital," said Mr Geithner. "That's something we have to impose through standards set in regulation."

Bankers said the more stringent rules on capital and liquidity, coupled with changes that would stop the practice of letting financial groups choose their regulators, would cause profound changes in the industry.

Senior Wall Street executives said they expected tougher regulation, after the government used billions of dollars of taxpayers' money to rescue the sector. But they added that the proposed changes would add to pressure on banks' profits.

The Treasury has not decided on the plan's specifics, notably which institutions would be categorised as systemically important and how much more capital they would be obliged to hold. But insurers such as AIG, which was bailed out with $173bn of public money, would be included.

Most hedge funds, which have been subject to lighter regulation than larger institutions with a broader client base, would have to register with the Securities and Exchange Commission and provide data on their trades and debt levels to allow regulators to judge whether risks were building in the wider financial system.

Over-the-counter derivatives trading would be subject to more scrutiny and the administration would force trades to go via an approved central clearing house.

The regulatory overhaul will take on an international dimension, a facet likely to please French and German governments before the Group of 20 summit of developed and emerging countries in London next week.