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The Federal Deposit Insurance Corp. backed a draft rule barring banks from trading for their own profit instead of their clients on a 3-0 vote. The ban on so-called proprietary trading was required under the financial overhaul law.

For years, banks had bet on risky investments with their own money. But when those bets go bad and banks fail, taxpayers could be forced to bail them out. That's what happened during the 2008 financial crisis.

The Federal Reserve has also approved a draft of the so-called Volcker Rule, named after former Fed Chairman Paul Volcker. The Securities and Exchange Commission must still vote on it, and then the public has until January 13 to comment. The rule is expected to take effect next year after a final vote by all three regulators.

Under the draft, banks must hold investments for more than 60 days. Regulators determined that was enough time to limit speculative trading.

The banking industry said Tuesday the rule is too complex to work and will put U.S. financial firms at a competitive disadvantage to those in other countries.

"How can banks comply with a rule that complicated, and how can regulators effectively administer it in a way that doesn't make it harder for banks to serve their customers and further weaken the broader economy?" Frank Keating, head of the American Bankers Association, said in a statement.

The rule also would limit banks' investments in hedge funds and private equity funds, which are lightly regulated investment pools. Banks wouldn't be allowed to own more than 3 percent of such a fund. In addition, a bank's investments in such a fund couldn't exceed 3 percent of its capital.

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