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* Staff recommends 22 cent cap, up from 12 cent proposal
* Includes 1 cent for covering fraud prevention costs
* Fed staff says Dodd-Frank language on issue "ambiguous"
* Visa and MasterCard shares jump higher
WASHINGTON, June 29 (Reuters) - The U.S. financial industry won a massive lobbying fight in getting the Federal Reserve staff to recommend almost doubling a proposed cap on the amount banks can charge retailers when a debit card is used.
Under the staff proposal to be voted on by the Fed board later on Wednesday, banks would be allowed to charge 22 cents per debit card transaction.
That is 10 cents more than the cap that was proposed in December, and includes a one cent allowance for meeting certain fraud prevention standards.
In addition, banks would be allowed to charge 5 basis points per transaction to accommodate for fraud losses.
Last year's proposal took banks such as Bank of America (BAC.N) and Citigroup (C.N), and card network companies such as Visa (V.N) and MasterCard (MA.N), by surprise. In response they launched a vigorous lobbying fight that included thousands of comment letters to the Fed.
The Fed staff said the central bank could bump up the cap because the provision in last year's Dodd-Frank legislation that called for the fee limit "is ambiguous and may be read in several ways."
Shares of MasterCard rose about 8 percent and Visa was up about 10 percent after news of the Fed staff proposal. Shares of major banks that issue debit cards got a more modest boost.
Before the rule was released, some bank analysts were expecting a 20-cent cap to be the best-case scenario for the industry.
Banks still stand to lose billions of dollars from the fee crackdown.
The Fed has said the average amount of fees charged by banks to retailers per transaction was 44 cents in 2009.
The previously proposed 12-cent cap would have cost banks about $14 billion annually, according to card comparison website CardHub.com. (Reporting by Dave Clarke; Editing by Tim Dobbyn)