The US government will boost its stake in Citigroup under a deal announced Friday aimed at shoring up confidence in the troubled banking giant. The government's stake will be raised to 36 percent from the current eight percent under the plan to convert 25 billion dollars of public capital injected in the form of preferred stock in the bank to ordinary shares, officials said.
The conversion does not call for more government funds but helps shore up the capital position of Citi, once the world's biggest financial services firm which has received 45 billion dollars in bailout funds from the government. The move aims to avoid a feared nationalisation of Citi, once the world's biggest financial firms, but analysts said the conversion gives the government effective control as the bank's largest shareholder.