Rules that have the potential to slash banks' debit card profits and stop traders from excessive speculation in oil and other commodity markets will be unveiled by U.S. regulators this week.

Banks also face the prospect of tougher capital rules as regulators spend a busy three days fleshing out the Dodd-Frank law enacted in July to rein in Wall Street's behavior in response to the 2007-09 financial crisis.

Regulators must craft more than 200 rules before July 2011, including a new regulatory regime for the over-the-counter derivatives market.

On Thursday, the U.S. Commodity Futures Trading Commission will outline long-awaited plans to clamp down on speculation that was blamed for sending food and oil prices to record highs in 2008.

Crude is around $90... I'm not saying it's speculators, but it's our job to do what we can and now we have the law on our side, CFTC Commissioner Bart Chilton, said at a recent agency meeting.

Speculation in various forms has been criticized by corporate executives and global policymakers. It has been blamed for driving up commodity prices, pushing down companies' stock prices and hurting countries' financial conditions.

The CFTC's plan will apply to physical commodities such as fuels, metals and agricultural products.

CARD FEES

Also on Thursday, the Federal Reserve is due to propose curbs to fees that banks charge retailers when a customer uses a debit card. Limits on the so-called interchange fee have upset banks already reeling from legislation that restricts credit card interest rates and fees.

The biggest issuer of debit cards, Bank of America, has said that the limits could cost it between $1.8 billion to $2.3 billion.

One of the industry's lobby groups, the Financial Services Roundtable, said that the Fed's rule will shift retailers' costs to consumers as banks seek to recover all the operating costs of debit cards.

A bipartisan group of senators, including Richard Shelby, the top Republican on the Senate Banking Committee, have urged the Fed to take sufficient time to gather and analyze all the facts before issuing its debit card rule.

Competing for bank industry attention on Thursday will be the testimony of U.S. Treasury Secretary Timothy Geithner on the $700 billion Troubled Asset Relief Program that was used to bail out major financial firms like Citigroup and automaker General Motors.

The often-criticized TARP program could cost taxpayers just $25 billion according to a recent congressional estimate, with repayments by many recipients and government sales of shares in Citigroup and GM.

BANK CAPITAL

Banking regulators meet on Tuesday as the board of the Federal Deposit Insurance Corp to take the first steps toward implementing higher capital requirements set out in the Dodd-Frank law.

Many lawmakers and regulators came out of the financial crisis arguing banks did not hold enough high quality capital to deal with the shock to financial system and this contributed to the government having to come to their aid.

Then, on Wednesday, the SEC is due to outline exemptions from expensive margin requirements for businesses and others that use the derivatives to manage risk.

The SEC, which will only police up to a tenth of the estimated $600 trillion market, is expected to largely follow the CFTC's lead.

Under the CFTC's plan, companies would be exempt from setting aside billions of dollars in margin if one side of the trade is not a financial entity and can prove that the deal is not speculative.

Both regulators must define swap execution facilities (SEFs), or the venues that will eventually trade the swaps. How they write the rules will determine who gets to deal with the swap trades. The CFTC is expected to address this issue on Thursday.

The CFTC and fellow market regulator, the Securities and Exchange Commission, have laid out preliminary plans to regulate clearinghouses that will help mitigate risk if one party to a swap transaction defaults.

(Reporting by Dave Clarke and Rachelle Younglai; Additional reporting by Christopher Doering; Editing by Tim Dobbyn)

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