UPDATE 2-US FDIC proposes tough private equity guidelines

* Some regulators fear will deter investment in banks

* Proposal calls for high capital levels, 3-yr commitment (Recasts, adds reaction)

By Karey Wutkowski and Paritosh Bansal

WASHINGTON/NEW YORK, July 2 (Reuters) - Private equity groups seeking to buy failed U.S. banks would have to maintain very high capital levels and remain owners for three years under tough guidelines proposed on Thursday that some bank regulators fear could deter needed investment.

At a meeting of the Federal Deposit Insurance Corp, the heads of the Office of the Comptroller of the Currency and the Office of Thrift Supervision agreed to issue the proposals for public comment, but said they may need to be scaled back before final approval.

"I do fear that the current articulation of the proposal has standards that go too far," said Comptroller of the Currency John Dugan. "There is real money and real capital that can provide savings to the deposit insurance fund."

Bank regulators are increasingly looking to nontraditional investors to nurse failed banks back to health as the number of failed institutions continue to rise, draining the FDIC's deposit insurance fund.

But experts said the burdensome proposals could easily have a chilling effect on a large pool of potential investors. "As one of my partners put it, I can't imagine it being more inhospitable to private equity," said Alan Avery, a banking lawyer at Arnold & Porter LLP.

The proposals call for private equity groups to maintain capital at troubled banks at levels that far exceed current regulatory standards for "well capitalized" institutions.