Senate Banking Committee members are considering a watered down version of the 'Volcker rule' unveiled last month by the Obama administration to curb risk-taking by banks, sources familiar with the panel's thinking said on Thursday.

Committee members are leaning against a strict ban on banks' proprietary trading and are considering requiring regulators to strengthen supervision of banks that are involved in such activities, said the sources, who requested anonymity because the proposal has not been made public.

The administration stunned markets in January with a three-part proposal, inspired by White House economic adviser and former Federal Reserve Chairman Paul Volcker, to limit banks' proprietary trading, get them out of the hedge fund and private equity businesses and cap their future growth.

(Reporting by Rachelle Younglai; Editing by James Dalgleish)