NEW YORK/BOSTON, Aug. 8 (Reuters) – Speculation continues to grow as to which Wall Street bank will be looking to get out of proprietary trading or the private equity business in order to comply with new financial regulatory reform legislation.

But despite recent moves by Bank of America, Morgan Stanley and Goldman Sachs on that front, most banks will be able to pare back investments in risky ventures without making dramatic changes to their structure.

The new Volcker rule, named for former Federal Reserve Chairman Paul Volcker, restricts banks from proprietary trading and sets new limits on the size of private equity or hedge fund investments.

It means they cannot hold more than 3 percent of their Tier 1 capital in private equity or hedge fund investments. Tier 1 capital is a measure of a company's financial strength.

Some, like Bank of America , hover near their 3 percent cap, and will need to make only minor adjustments to comply. Others, like Goldman Sachs, will need to be more aggressive.

Still, banks have several years to reduce their holdings – meaning that even institutions with significant private equity holdings are likely to be able to keep units.

''They (financial institutions) have time to adjust,'' said Mark Nuccio, partner at Ropes & Gray in Boston. ''I don't think there's any intention on behalf of the regulators to create economic dislocation at financial institutions.''

Goldman Sachs is considering two options for its main proprietary trading group as it tries to comply with the rule, sources familiar with the process said.

Meanwhile, Citigroup Inc agreed to sell its private equity business in July. In 2009, the bank had moved that unit into its Citi Holdings repository for assets it considers unrelated to its main businesses.

Citigroup still has a capital advisors hedge fund business, which manages about $14 billion overall, including about 5 percent – or $5 billion – of its Tier 1 capital. While the new rules might be forcing some banks to rethink their business, for others it comes as a welcome excuse to move ahead with plans to divorce themselves from unwanted hedge or private equity funds, experts said.

''If you were leaning toward a strategic change anyway then now is a good time to reevaluate the business because you have a regulator saying you shouldn't be in this business anyway,'' said  Thomas Whelan, chief executive of Greenwich Alternative Investments.

That is especially true at some banks that raced to acquire hedge fund operations at the height of the industry boom when having a hedge fund was a necessary part of the strategic mix.

But after 2008, when hedge funds posted their worst-ever returns and clients raced to redeem assets, that calculus changed for many banks, industry experts said.

Case in point may be Morgan Stanley's expected decision to spin-off hedge fund FrontPoint Partners.

While the discussions might be seen to have been driven by the Volcker rule, Morgan Stanley has been disenchanted with its 2006 acquisition of the hedge fund for quite some time, industry experts said. A Morgan Stanley spokeswoman declined to comment on the matter.

Similarly, Bank of America's decision to shed its private equity group had been in the works before President Obama signed the financial regulatory reform measure into law even though the move to spin out the group will help the Charlotte, NC bank come into compliance with the new law's regulatory capital requirements.