U.S. Treasury Secretary Henry Paulson says U.S. financial regulations need modernization to match the growing size and complexity of financial institutions.

In a speech in Washington Monday, he suggested giving the U.S. central bank (known as the Federal Reserve) a larger role in stabilizing the economy, and more authority to demand information from banks and other institutions in exchange for government help during a crisis.

He also proposed a "prudential financial regulator" to watch over banks and insurance firms, and a "conduct of business" regulator to protect investors and consumers.

Paulson's plan calls for consolidating regulatory agencies with the goal of simplifying and improving oversight of the financial system.

The proposals come as that system faces its most severe credit crisis in decades.

The new rules must be approved by Congress, and Paulson says they will generate "controversy and healthy debate."

Some information for this report was provided by AFP, AP and Reuters.