FRANKFURT (Reuters) - A new draft of proposed international bank regulation is unacceptable for Germany because the rules might restrict lending by the country's banks, the head of Germany's financial regulatory agency said.

The Basel Committee of bank supervisors from nearly 30 countries intends to deliver the new Basel IV rules by the end of this year. The rules aim to avoid repeats of the financial crisis of 2008-09, when taxpayers had to bail out under-capitalized lenders.

The plan, however, has drawn criticism in Europe. The European Union's financial services commissioner said several weeks ago that the reform risks hurting European banks and needs to be changed.

Felix Hufeld, the president of Germany's regulatory agency, Bafin, weighed in late on Tuesday.

"Discussions are not over the finish line yet," Hufeld said. "From a German perspective, what we have on the table so far is not acceptable."

Germany and France, especially, are worried that the proposals presented so far could discourage their banks from lending to consumers and companies. They say that the new rules demand a significant increase in the capital banks must hold against their risks.

One bone of contention is the level of discretion over how much capital banks must hold against loans turning sour.

Regulators want to cut complexity and inconsistency in capital requirements among big banks that use their own models, rather than methods set out by regulators, to calculate credit risks.

Models typically indicate lower capital requirements, a big advantage, since credit risk accounts for 70 percent of a bank's capital buffer. Regulators suspect that the big banks use models to make capital ratios appear stronger than they are.

But the switch to standards defined by regulators hits banks in different countries to a different extent.

European banks argue that the new rules favor U.S. banks because the U.S. economy depends less on bank loans for financing than on capital markets.

In addition, European banks usually keep mortgage loans on their own books, while U.S. banks can offload them to state agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as Fannie Mae and Freddie Mac.

The Basel committee has said that the proposed rules will not increase overall capital requirements significantly. Bank lobby groups say they would raise capital requirements as much as 50 percent for some banks.

Bafin's Hufeld indicated that the Basel committee may be unable to find common ground on the issue.

"We are trying to develop a global standard. But if part of the industry would be eliminated, that is not acceptable for us," he said.

(Reporting by Alexander Hübner; Writing by Arno Schuetze; editing by Larry King)