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bank_sign(MCT)—Government regulators approved a sweeping new set of rules for the nation’s biggest banks that ban them from the kind of ultra-high-risk trading that nearly collapsed the world’s financial system.

Despite a fierce lobbying effort to prevent the new measure, five of the nation’s top regulatory agencies on Tuesday approved the final version of a key component of the Dodd-Frank financial overhaul law. The so-called Volcker rule, named after former Federal Reserve Chairman Paul Volcker, prohibits banks from trading for their own profit rather than on behalf of customers.

The measure highlights a new era of stiffer oversight as emboldened regulators flex their muscles. The stricter-than-expected rule comes amid a barrage of costly government investigations into the financial industry, and as securities regulators increasingly push to extract admissions of wrongdoing from big firms.

“Big banks lost,” said Mark Williams, a former Fed bank examiner who now teaches at Boston University. “Wall Street aggressively fought the Volcker rule.”

The rule generally prohibits federally insured banks’ ability to bet in risky investments such as private equity and hedge funds. Private equity funds buy companies and turn them around before selling them, while hedge funds often employ complex trading strategies. These investments have proved highly profitable in the past, but are also dicey because of their opaqueness.

Wall Street’s biggest banks have taken steps to get out of those businesses in anticipation of the new restrictions. But the version of the rule adopted Tuesday goes a step further than the financial industry had hoped.

It narrows loopholes that would allow banks to make other investments that critics argued could essentially lead to short-term “proprietary trading.” Such wagering uses the firm’s money, rather than a client’s.

“The Volcker rule will make it illegal for firms to use government-insured money to make speculative bets that threaten the entire financial system, and demand a new era of accountability from CEOs who must sign off on their firms’ practices,” President Obama said in a statement.

The rule goes into effect in April but banks have until July 2015 to comply.

Another major focus of the rule concerns how banks could buy and sell securities as a way to hedge risks on their balance sheet. This is considered a common practice on Wall Street that helps banks make their balance sheets a bit safer from dramatic market movements. But regulators have long been worried that over-aggressive traders could disguise complicated risky bets as prudent hedging as a way to score profits.

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