* Fed clarifies 2-year compliance period for Volcker rule
* Fed has said may miss July deadline to finalize rule
* Delays made Wall Street uneasy about compliance date
* Critics have called Volcker rule proposal too complex
By Alexandra Alper
WASHINGTON, April 19 (Reuters) - The Federal Reserve on T hursday clarified that U.S. banks will have at least until July 21, 2014 to ease into the Volcker rule's trading and investing crackdown, as regulators sought to temper panic on Wall Street that the restrictions would be strictly enforced starting this summer.
The Fed also said it has the ability to extend the compliance period for the yet-to-be-finalized rule beyond that date if needed.
The Volcker rule, mandated by the 2010 Dodd-Frank financial reform law, bans banks from trading with their own funds and greatly limits their ability to invest in hedge and private equity funds. It seeks to limit risk-taking by banks that have government backstops like federal deposit insurance.
Regulators proposed a 300-page version of the rule in October, but have said they are unlikely to finalize it by the July 21, 2012, deadline.
Banks were given a 2-year "conformance period" under the law. But they have raised questions about how a phased implementation would work if regulators miss the July deadline.
They have warned there could be disruptions in markets because of a lack of clarity on how to comply with the crackdown.
Regulators sought to calm those fears on Thursday.
In its statement, the Fed said entities have "the full 2-year period provided by the statute to fully conform its activities and investments, unless the Board extends the conformance period."
The move was welcomed by the financial industry.
The guidance "is critically important because it alleviates concerns over potentially having to comply with a rule whose details had not yet been made clear," the Securities Industry and Financial Markets Association, a lobbying group, said in a statement.
But Republican Senator Bob Corker, who has expressed opposition to the rule, said the announcement itself is proof that the rule is "overly complex."
"While I am pleased that the regulators have recognized the need for this modest step, this flawed rule will need to be fixed by Congress so companies across our country will not have to incur higher costs of doing business," he said in a statement.
Some supporters of the crackdown have also asked regulators to proceed carefully.
Democratic Representative Barney Frank, who co-authored the law that bears his name, said last month that regulators should issue clear guidance on what they expect from banks in the period of time between the July deadline and when the final rule is released.
He also called the proposal "far too complex" and urged regulators to issue a simplified version of the Volcker rule by Sept. 3.
The Volcker rule is expected to have the most impact on Wall Street firms, including Goldman Sachs and Morgan Stanley , that have made significant profits betting with their own money.
Heralded by the some as a means to rein in the risk-taking that nearly toppled the financial system in 2007-2009, the Volcker rule has been excoriated by its critics, who warn it could take liquidity out of the market and make it hard for firms to raise capital.