By Ryan Tracy And Scott Patterson 

WASHINGTON--The Federal Reserve on Thursday said it would give banks two more years to sell private equity and hedge fund stakes covered by the Volcker rule, a win for banks who had requested more time to unwind positions.

The Fed move effectively extends from July 2015 to July 2017 a deadline by which banks would have had to sell the fund investments, which are barred under the rule's restrictions on bank trading. The move will "reduce the potential disruptive effects that significant divestitures of covered funds could have on markets," the Fed said in an order announcing the change.

Since the Volcker rule was adopted a year ago, banks have been pressing regulators for a multiyear delay of the requirement for them to pull out of private equity and other funds. Firms such as Goldman Sachs Group, Inc., Morgan Stanley, and J.P. Morgan Chase & Co. will benefit from Thursday's news. Goldman alone has about $7 billion invested in private equity, according to a November regulatory filing.

Write to Ryan Tracy at ryan.tracy@wsj.com and Scott Patterson at scott.patterson@wsj.com

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