The Federal Deposit Insurance Corp. has softened elements of its policy on private equity investment in banks, seeking to draw new bids in order to shore up the capital-ailing industry.     

        In the regulatory agency's board meeting on Wednesday, a majority of board members voted to roll back the Tier 1 leverage ratio from 15% to 10% in a widely expected move. It also did away with its source of strength requirement for investors in banks in its policy statement, which the board will review again in six months.

        "I think private equity will continue to bid with these criteria," said Sheila Bair, chairman of the FDIC, about the new policy statement.

        Bair said the FDIC will monitor any subsequent bidding activity closely.

        The capital ratio shift to 10% --required to be maintained for a minimum three-year period -- represents a move to appease investors' concerns along with other aspects of the new policy statement, according to industry observers.

        "They invited private equity to partner with existing banks and that actually opens up an interesting alternative approach. You have a more reliable assurance that the existing bank's management will be overseeing the failed bank," said Joseph Lynyak, a partner at Venable.

        FDIC vice chairman Martin Gruenberg noted that the policy statement encourages investors to enter into partnerships with existing bank holding companies.

        The policy revisions, Lynyak said, were a logical comprise to private equity investors' concerns about the previous guidelines for investing in banks.

        A number of high-profile private equity groups like W.L. Ross & Co. have moved to tap into the bank investment opportunity as the FDIC seeks to shore up the industry. Ross, named after financier Wilbur Ross, was part of an investor group that took control of failed Coral Gables, Fla.-based BankUnited in May.

        FDIC director John Dugan said in the meeting that the new 10% ratio requirement was adequate for most transactions.

        The FDIC said it received 61 individual comments on the proposed guidelines, many submitted by private investment firms; the average Tier 1 capital ratio suggested in the comments was 8%.

Some well-established private equity financiers, including Ross, have challenged the regulatory agency's previously disclosed guidelines, including the 15% Tier 1 ratio measure, given that well-capitalized banks have only needed to maintain a 5% capital ratio in the past to keep a Tier 1 ranking.

        Carlyle Group managing directors Olivier Sarkozy and Randal Quarles, for example, addressed the matter in more than one editorial. In their latest missive, published in The Wall Street Journal on July 17, the pair wrote: "Some of the specific measures in the FDIC's proposal would deter new capital from entering the system, dramatically elevate costs for the FDIC, and ultimately increase the risk that the taxpayers will face yet another large bill for the system's failures."

        FDIC board member John Bowman was the stalwart holdout on the revised guidelines, voting against the policy.

        However, other board participants were more upbeat in their assessment of new guidelines on the purchase of failing institutions by private investors.

        "I believe that the policy statement before us today is a reasonable effort to strike a balance," said Martin Gruenberg, vice chairman of the FDIC, who also supported the new policy.