The Dow Jones closed down 2%, its worst fall since October, while Japan's Nikkei was down early on Friday.
Shares in major US banks Goldman Sachs, JP Morgan and Bank of America all fell.
Mr Obama - who said he was "ready for a fight" with banks - plans to limit the size of banks and impose restrictions on risky trading.
"Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.
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 may mean that some of the biggest US banks have to be broken up.
They also include a ban on retail banks using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.
If these folks want a fight, it's a fight I'm ready to have Barack Obama
That attitude brought an immediate reaction from the markets.
Investment banking giant Goldman Sachs lost more than 4% despite announcing a sharp increase in profits. Bank of America fell 6.2% and shares in JP Morgan Chase were down 6.6%.
"Banking reforms do not come bigger than those proposed by President Obama," the BBC's business editor Robert Peston said.
Fighting talk
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.
Source : http://news.bbc.co.uk/2/hi/business/8473890.stm
Shares in major US banks Goldman Sachs, JP Morgan and Bank of America all fell.
Mr Obama - who said he was "ready for a fight" with banks - plans to limit the size of banks and impose restrictions on risky trading.
"Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.
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 may mean that some of the biggest US banks have to be broken up.
They also include a ban on retail banks using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.
If these folks want a fight, it's a fight I'm ready to have Barack Obama
That attitude brought an immediate reaction from the markets.
Investment banking giant Goldman Sachs lost more than 4% despite announcing a sharp increase in profits. Bank of America fell 6.2% and shares in JP Morgan Chase were down 6.6%.
"Banking reforms do not come bigger than those proposed by President Obama," the BBC's business editor Robert Peston said.
Fighting talk
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.
Source : http://news.bbc.co.uk/2/hi/business/8473890.stm
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