Wells Fargo's chairman and chief executive officer (CEO) John Stumpf testifies before the U.S. Senate Banking Committee on Capitol Hill in Washington D.C., the United States, Sept 20, 2016. U.S. lawmakers grilled Wells Fargo's chairman and chief executive officer (CEO) John Stumpf on Tuesday over the bank's fake account scandal as he declined to support clawing back executive compensation. (Xinhua/Bao Dandan)

WASHINGTON, Sept. 23 (Xinhua) -- The U.S. Federal Reserve on Friday proposed a rule to limit the physical commodity activities of financial holding companies in order to help reduce catastrophic, legal and financial risks.

According to the proposed rule, the central bank will require banks to hold additional capital against their investments in physical commodities, limit the amount of physical commodity trading activity that banks can conduct, restrict their involvement with power plants.

The Fed said on Friday in a statement that the possibility of an environmental accident due to the physical commodity trading present significant legal, reputational and financial risks to banks.

The Fed estimated that the amount of capital required to be held to meet the proposed rule will increase by approximately 4.1 billion U.S. dollars in total.

Analysts said that Goldman Sachs and Morgan Stanley are likely to see massive increases for capital required to be held against their commodity trading, because under current law, these two banks are allowed to engage in broader physical commodity trading activities while other banks cannot.