WASHINGTON (MarketWatch) — The Federal Reserve on Friday moved forward on a plan to make it more difficult for banks to be involved in physical commodities, citing the legal, reputational and financial risks from disasters such as the BP oil spill. Under the proposal, firms would have to hold more capital, not be able to engage in activities involving power plants and not be allowed to own or store copper. Two banks, Goldman Sachs GS, -1.51% and Morgan Stanley MS, -1.67% have relied on a grandfather clause to engage in physical commodity business that hasn’t been authorized for other Fed-regulated banks, while 12 banks, including Bank of America BAC, -0.54% Citi C, -0.50% and J.P. Morgan Chase JPM, -0.16% are involved in physical commodity trading, energy management and energy tolling activities to some degree.