US President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises.
The plans - the most far-reaching yet -include limits to the size of banks and restrictions on riskier trading.
"Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.
He added he was ready for a "fight" with any banks prepared to lobby against tougher regulations.
US stocks such as JP Morgan Chase and Bank of America fell sharply as the sweeping planned reforms were announced.
JP Morgan lost 6.6%, while Bank of America gave up 6.2%.
Limiting risk taking
"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Mr Obama said.
His proposals also include a ban on retail banks from using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.
"Banking reforms do not come bigger than those proposed by President Obama," the BBC's business editor Robert Peston said.
This may mean that some of the US' biggest banks, such as Bank of America and JP Morgan, whose shares were badly hit, may have to be broken up.
The industry lobby group for banks suggested Mr Obama was trying to return the US to the past.
"The better answer is to modernise the regulatory framework and not take the industry and the economy back to the 1930s," said the Financial Services Roundtable, an industry group that represents large Wall Street institutions.
In the UK, shadow chancellor George Osborne said that if the Conservatives won the next general election, they would impose an identical dismantling of UK banks to those suggested by the US president.
City Minister Lord Myners said the US proposals were "very much in accordance with the direction we have been setting".
Mr Obama's move is his first proposal since Republican Scott Brown's shock victory in Massachusetts to win a Senate seat.
The Republican victory may make it harder to get Mr Obama's proposals passed in the Senate, as they are more likely to get held up in political wrangling.
"This is a political effort because of what happened in Massachusetts," said economist Peter Morici of the University of Maryland.
Banks have also been lobbying against more stringent regulation.
"If these folks want a fight, it's a fight I'm ready to have," Mr Obama vowed.
The president dubbed his proposals on limiting bank risk the Volcker rule - after Paul Volcker, one of his economic advisors and a former chairman of the Federal Reserve central bank.
The moves follow popular anger at financial institutions, who have been paying large bonuses to staff even as they accepted government bail-outs to keep them going.
Mr Obama's proposals appear to be a return to the principles underlying the Glass-Steagall Act.
That law - from the 1930s in the aftermath of the Great Depression - separated commercial and investment banking and was eventually abolished in 1999 under President Bill Clinton.
Mr Clinton's financial secretary at the time, Robert Rubin, previously worked at Goldman Sachs and went on to be an advisor to Citigroup until last year.
The latest proposals follow a $117bn (£72bn) levy on banks to recoup money US taxpayers spent bailing out the banks.
The tax will claw back some of the losses from a $700bn taxpayer bail-out of US banks known as the Troubled Asset Relief Program (Tarp).
It was drawn up in the midst of the financial crisis in 2008, following the collapse of US investment bank Lehman Brothers and rescue of insurance giant American International Group (AIG).