WASHINGTON (CNNMoney) -- The board of the Federal Deposit Insurance Corp. on Tuesday approved a draft version of a rule aimed at cracking down on big banks that make risky bets with their own money or own hedge funds.
The FDIC board unanimously passed the draft rule, agreeing it should be published so regulators can collect public comment. At the same time, Federal Reserve published the rule on its website, soliciting comment.
Named for its creator, former Federal Reserve chief Paul Volcker, the rule aims to rein in how banks use their own accounts to chase profits, what's known as proprietary trading.
The Volcker rule was part of the massive Wall Street reforms passed in 2010 and was heralded as one of the sharpest tools available to prevent future financial crisis by chasing speculation and risk out of the banking system.
But the draft rule would still allow the big banks to own a 3% stake in hedge funds and allow banks to "make markets" and risky bets for their clients, using their money.
"Given the controversy that has surrounded this provision --- how it addressed root causes of the financial crisis; whether it does too much or too little--- I am delighted the agencies reached agreement," said the head of the Office of the Comptroller of the Currency John Walsh, who is on the FDIC board.
The draft rule leaves a lot of blanks to be filled out and includes more than 100 questions for stakeholders, such as what type of inventory should a bank be able to build up on behalf of clients.
The rulemaking is a combined effort of the FDIC, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Board of Governors.
Now regulators will collect what could be several thousand letters, e-mails and calls about the proposal over the next three months, a period ending Jan. 12.
After that, regulators will jointly issue a final rule after analyzing the comments, but that could also take several more months.
Congress had wanted the Volcker rule to kick into place next July, but they gave banks until July 2014 to comply. Some banks could delay the rule until 2017.
The Volcker rule was intended to be a nod toward Glass-Steagall, a Depression-era law that Congress repealed in 1999.
Glass-Steagall had prevented commercial banks from dabbling in investment banking. Some critics argue that its demise paved the way for deposit-taking banks to make colossal bad bets, while bank traders chased profits and big bonuses.
Knowing the rule was coming, some banks have already started changing how they do business.
Goldman Sachs (Fortune 500), JPMorgan Chase ( , Fortune 500) and Bank of America ( , Fortune 500) say they have closed their proprietary trading desks. Morgan Stanley ( , Fortune 500) has said it will be out of proprietary trading by the end of 2012.,
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