The House of Representatives was expected to approve the biggest changes in financial regulation since the Great Depression on Friday, marking a win for the Obama administration.

With the Senate due to debate reforms well into next year, the House could complete its legislative work by passing a 1,279-page bill that has been hammered out in the months since 2008's financial crisis.

The bill still faces potential amendments on the House floor, including one that would gut a key provision -- the proposed creation of a Consumer Financial Protection Agency (CFPA) -- and another to change mortgage bankruptcy law.

The House approved a section of the bill on Thursday that would impose regulation for the first time on the $450 trillion over-the-counter derivatives market, including credit default swaps like those at the root of American International Group Inc's problems.

The bill will increase transparency in the marketplace and reduce the systemic risk that over-the-counter derivatives can pose to the economy if left unchecked, said Democratic House Agriculture Committee Chairman Collin Peterson in a statement.

The House also backed an amendment from Democratic Representative Stephen Lynch to limit financial firms to 20 percent ownership stakes in OTC derivatives clearinghouses.

If ultimately approved, the Lynch measure could affect the plans of the Wall Street giants that dominate OTC derivatives markets -- Goldman Sachs Group Inc, JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp and Morgan Stanley -- and exchange operators such as Nasdaq OMX.

The House bill would also give the government new powers over large banks and set up the CFPA to regulate credit cards and mortgages.

It would create an inter-agency council to police systemic risk in the economy, crack down on hedge funds and credit rating agencies, and expose Federal Reserve monetary policy to unprecedented congressional scrutiny among other reforms.

Bank and Wall Street lobbyists have spent months fighting the bill. Republicans have attacked it, saying the measure would codify bailouts in law and destroy jobs, while setting up new government bureaucracies and piling costs on businesses.

Financial reforms are strongly backed by U.S. President Barack Obama and most congressional Democrats, who see them as crucial to preventing a repeat of last year's global crisis and bailouts of companies such as AIG and Citigroup.

On Friday, two contentious amendments will be handled.

One, offered by Democratic Representative John Conyers, would let bankruptcy judges change the terms of mortgages for distressed homeowners in bankruptcy court -- a long-cherished goal of homeowner advocates that has garnered more attention amid soaring foreclosures.

The House passed virtually the same measure -- known as mortgage cramdown -- in March over the objections of Republicans and banking lobbyists, but it died in the Senate.

Another amendment, from Democratic Representative Walt Minnick, would scrap the proposed CFPA and replace it with a council of regulators.

The White House criticized the Minnick measure on Thursday, saying it would let big banks, mortgage companies and credit card companies ... continue to get away with the practices that helped cause the financial crisis.

(Editing by Jeffrey Benkoe)