* Fed governor says Volcker watchdogs working on revising rule
* Says regulators have "significant flexibility" to ease burden
* Both small and larger banks should benefit from rule-change (Adds more quotes, context)
WASHINGTON, Oct 3 (Reuters) - Two top U.S. financial regulators told a Reuters Summit on Tuesday they were confident watchdogs would reach an agreement to significantly reduce the burden of the so-called Volcker Rule banning banks from speculating with their own money.
The comments by Federal Reserve board Governor Jerome Powell and Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo offer the strongest indication yet the country's regulators are committed to tweaking the rule drawn up after the 2007-2009 global financial crisis.
Reviled by banks who say it is too burdensome and vague, the Volcker Rule can only be re-written jointly by five U.S. regulatory agencies - including the Fed and the CFTC - meaning the process for tweaking it will be more complicated than for other rules mandated by the 2010 Dodd Frank Act.
I am confident of what the outcome is going to be. I think we are going to be able to get to a five-agency rule on Volcker that is significantly less burdensome," Powell told a Reuters Summit in Washington D.C., adding it would not however be a quick or easy process.
"You do have to get agreement from the agencies, thats a process Im going to respect. Were just going to have to work through it, and the time will be what it is. The important thing is to get it right."
Since its creation, large banks have lamented the Volcker Rule, arguing that it is practically impossible for regulators to discern what type of trading is barred while other activity, such as market-making, remains acceptable.
The cost of complying with the rule are so high that even small tweaks could save the banking industry hundreds of millions of dollars, according to analysts.
Powell said the rule, which applies to all U.S. deposit-taking institutions, really hurts smaller banks that have never operated proprietary trading businesses, but added it was possible to tweak the rule so larger banks could also benefit.
"We're looking at that. We think there's significant flexibility to make Volcker more effective and efficient, even for the largest institutions and certainly for the smaller," Powell said.
Treasury Secretary Steven Mnuchin has identified the Volcker Rule as one of his top targets in the administrations efforts to ease private sector regulation. As head of the Financial Stability Oversight Council, Mnuchin has pushed other financial regulators to reconsider the current rule, which was finalized in 2013.
Giancarlo said he was also confident Volcker would be revised, adding that policymakers should avoid framing the debate over the future of U.S. financial reform as a "false choice" between keeping or reversing Dodd Frank.
"The only way forward is to take account of the way markets are changing and where we have regulations in place, make sure theyre optimized, he said. (Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Susan Thomas)