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Two U.S. senators push regulators to finish Volcker rule

* Merkley, Levin tell regulators to finish Volcker rule this year

Senators say time to settle disputes ``long overdue''

WASHINGTON, Oct 25 (Reuters) - Two influential U.S. senators on Thursday urged regulators to resolve any differences and finish writing a controversial ban on proprietary trading known as the Volcker rule.

Senators Jeff Merkley and Carl Levin, the Democrats who authored the Volcker rule provision in the 2010 Dodd-Frank financial law, sent a letter urging regulators to release a final version of the rule before the end of the year that is both simpler and stronger than regulators' initial proposal.

The Federal Reserve, Federal Deposit Insurance Corp, Office of the Comptroller of the Currency and Securities and Exchange Commission jointly put out a proposed rule a year ago to curb banks' speculative trading with their own money.

The Commodity Futures Trading Commission separately proposed a similar version of the rule in January.

The Volcker rule was set to take effect in July, but regulators still have not issued a final version amid some disagreements over how to make it work.

``As with any rulemaking, different agencies may have their own perspectives on various provisions,'' the senators' letter said. ``We are concerned that some ongoing staff-level differences may be obstructing progress. The time for resolving those differences is long overdue.''

Lawmakers directed regulators to implement the Volcker rule to prevent banks that receive deposit insurance and other government backstops from making risky trades, which could potentially threaten their stability.

Critics of the industry say so-called proprietary trading was at least partially to blame for the 2007-2009 financial crisis.

The rule was named for former Fed Chairman Paul Volcker, who championed the reform.

The proposed rule covers trades in securities, futures and commodity forwards, or contracts to buy or sell a certain amount of a commodity at a particular point in the future.

Regulators have said there are differences of opinion on how the rule should be implemented. Progress on the rule slowed when officials received thousands of comment letters on the initial 300-page proposal, including critical letters saying the rule is too complex.

At the SEC, both Republican commissioners have called for regulators to scrap the proposal and start from scratch, saying the rule as written could threaten the health of U.S. markets.

``I don't think it should surprise anyone that, given the different nature of the institutions that we regulate, that we have some different perspectives,'' SEC Chairman Mary Schapiro told an audience at a Securities Industry and Financial Markets Association conference in New York this week.

Schapiro said the agencies' staffs are working well together. Both Schapiro and CFTC Chairman Gary Gensler said Dodd-Frank requires only the three bank regulators to agree on a joint rule but they still hope to work out their differences.

Spokesmen at the FDIC, CFTC and SEC did not immediately respond to requests for comment on the letter from Merkley and Levin. The OCC declined to comment.

``We have received the letter and plan to respond,'' Federal Reserve spokeswoman Barbara Hagenbaugh said in an email.

FDIC Acting Chairman Martin Gruenberg said last month that regulators plan to finish the rule by the end of the year.

Merkley and Levin urged the regulators to keep that time frame, arguing that American families and businesses are at risk until the Volcker rule is in place. They said it is not necessary for all five regulators to approve the rule at once as long as a majority of the agencies can agree on a rule.

``Your agencies' ongoing failure to implement these important protections has left them and our economy at greater risk of another financial crisis,'' Merkley and Levin said.

Some supporters have said the Volcker rule could have prevented multibillion-dollar losses at JPMorgan Chase & Co , where a strategy meant to balance the bank's overall credit exposure turned into a risky bet that went wrong.

Regulators are working through a Volcker rule exemption for trades that banks use to hedge risk or create liquidity in markets.