The Federal Deposit Insurance Corp. may offer investors financing to buy distressed U.S. bank assets without requiring them to share an equity stake with the Treasury, according to people familiar with the matter.

Treasury capital probably wonâ??t be applied to the FDICâ??s pilot program to buy as much as $1bn of so-called legacy loans that is planned for June. However, no final decision has been made yet.

The proposal reflects officialsâ?? efforts to make the program more attractive to hedge funds and other investors fearing government attempts to impose limits on their pay. Regulators are hoping the initiative will bolster lendersâ?? capital levels after stress tests to gauge their health are completed next week.

The FDIC and Treasury are still discussing how the final program will work. The government may still get warrants from investors if the deals yield large profits, and the FDIC might set triggers for when and how taxpayers would benefit, they said.

The Treasury has not yet released its guidelines on how it will apply pay caps imposed by Congress and the White House on banks that receive government aid. The department has said that passive investors in public-private partnerships wonâ??t be affected by the pay caps.