Private equity asks for more relaxed FDIC proposals

NEW YORK (Reuters) - The private equity industry formally proposed on Thursday that a U.S. bank regulator’s guidelines on private capital investment in banks should be made less severe in order not to deprive the U.S. banking system of access to much-needed capital.

Investors have both publicly and privately complained about the Federal Deposit Insurance Corp’s proposals since published in July.

The guidelines are open to public comment until August 10.

The Private Equity Council, whose members include powerful firms such as Blackstone Group LP, Carlyle Group and Kohlberg Kravis Roberts & Co, said on Thursday the proposals would remove, “a very large and available pool of private capital from the bidding process for failed banks and thrifts.”

The biggest complaint from the industry has been that the guidelines call for a Tier 1 leverage ratio -- the ratio of a bank’s capital to its assets -- of 15 percent for three years, far higher than the 5 percent required of well-capitalized banks.

The PEC says a potential solution could be that the FDIC reformulate the capital requirement on a “Tier 1 Common ratio,” which it says demonstrates the true capacity of banks to absorb losses.

It also argues that a proposed three-year holding period that the FDIC proposes for private capital investors should be reduced, suggesting 18 months as a solution.

Sources previously told Reuters the FDIC would likely move fast in finalizing the guidelines and could make a decision as soon as this month.

Reporting by Megan Davies; editing by Andre Grenon