Volcker Says Rule Is Already Changing Wall Street

AP

In a rare interview, former Federal Reserve Chairman Paul Volcker told CNBC that his namesake rule has already changed the way Wall Street does business, despite the delays in crafting the final draft of the rule, which regulatory officials now say won't happen until next year.

(Read More: No Volcker Rule Until 2013: Sources)

Volcker's originally proposed rule — as part of the 2010 Dodd-Frank Wall Street Reform Act — was intended to restrict U.S. banks or an institution that owns a bank from executing riskier trading strategies for the firm's personal account while putting their customers money at risk. Critics of such "proprietary trading" say the typical strategies and volatile returns often resembled the speculative nature of a hedge fund than a bank. (Learn more here.)

Volcker told "Squawk Box" co-host Andrew Ross Sorkin that the rule has already been effective.

"Banks have stopped their straightforward proprietary trading operation, and they've largely cut back on their hedge funds and equity funds," Volcker said in the interview broadcast Thursday. "And as the managements and the directors finally understand that, 'Yes, this is a law that has to be followed,' they'll be able to manage their trading desks in what I think is an effective way."

Volcker said he isn't frustrated by the lack of progress but admits he doesn't know why the rule hasn't been fully adopted yet.

"Whether the [final] regulation has to be as complicated, I don't know what the new regulation will be," said Volcker. "But I don't think it needs to be as complicated as our initial regulation, which got a big reaction."

In prepared remarks at a recent banking conference, Treasury Undersecretary Mary Miller said, "Our goal is to achieve a strong and consistent [Volcker] rule, although the process is not as easy or simple as any of us would like."

--By CNBC's Andrew Ross Sorkin and Maneet Ahuja