The U.S. Federal Deposit Insurance Corp launched the first test of its Legacy Loans Program to help banks rid their balance sheets of toxic assets so they can raise new capital and increase lending, the agency said on Friday.

The FDIC, which insures the deposits of U.S. banks and acts as the receiver for failed institutions, declined to say what company's toxic assets were involved in the test.

In the test transaction, a receivership will transfer a portfolio of residential mortgage loans to a limited liability company in exchange for an ownership interest in that entity, the agency said in a statement.

FDIC spokesman Andrew Gray declined to comment on the size of the asset pool but said investors, who must sign a confidentiality agreement, have until September to submit bids. He did not specify a cut-off date.

Royal Bank of Scotland and Deutsche Bank AG are the advisers to the FDIC on the program, Gray said.

Accredited investors will be offered an equity interest in the limited liability company under two options.

The first is an all-cash basis, which is how the FDIC has recently sold receivership assets, with an equity split of 20 percent to the investor and 80 percent to the FDIC. The other option is a sale with leverage, under which the equity split will be 50-50 between the investor and the FDIC.

The FDIC said it will be protected against losses by the limits on leverage amount, the mortgage loans collateralizing the guarantee, and the guarantee fee.

The FDIC will analyze the results of this sale to see how the Legacy Loans Program can best further the removal of troubled assets from bank balance sheets, and in turn spur lending to further support the credit needs of the economy, the agency said.

Gray did not rule out additional sales depending on the success of the test.

If the test proves successful, open and operating institutions will be able to shed troubled loans if they follow certain loan-servicing requirements under either the Home Affordable Modification Program guidelines or FDIC's loan modification program.

The Legacy Loans Program is part of the government framework called the Public-Private Investment Program, which also includes a separate program under the Treasury Department to sop up troubled securities.

The Treasury unveiled PPIP last year with the goal of enticing private equity firms who were sitting on the sidelines awaiting rules on when and how they could participate.

(Reporting by John Poirier and Julie Vorman; editing by John Wallace)