The US Treasury has announced rescue plans for Citigroup, once America's largest bank, following a weekend of crisis talks to secure the lender's future.

Under the terms of the deal, the Treasury will take a $20 billion stake in the bank in return for guaranteeing around $306bn (£205bn) of risky assets on Citigroup's balance sheet.

The plan, announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), was put in place after the bank's share price plunged last week, halving its market value and raising fears over its future.

Last week, the company announced 52,000 job losses worldwide, on top of 23,000 job cuts previously announced. Citigroup employs 12,000 people in the UK and it is understood that around 2,000 London jobs will be lost through the most recent cull.

In a statement issued last night, the US Treasury, the US Fed and the FDIC said: "With these transactions, the US Government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the U.S. economy."

The trio added: “We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks.”

Citigroup has already received a $25 billion capital injection from the US Government's $700 billion bailout plan which will also fund the additional $20 billion injection. In September, the US Government refused to rescue Lehman Brothers, the investment bank, which sparked a fresh wave of panic throughout the global financial markets.

Over the weekend, Citigroup, led by chief executive Vikram Pandit, had been pressing officials to make a statement of support for the bank before the stock market opened today, where its shares fell by 60 per cent last week.

Discussions were led by Henry Paulson, the US Treasury Secretary and Ben Bernanke, chairman of the US Federal Reserve. Timothy Geithner, president of the Federal Reserve Bank of New York, who is being tapped by President-elect Barack Obama as his Treasury chief, also participated.

As part of the plan, the Treasury and the FDIC will guarantee against the possibility of unusually large losses; on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.

Under the loss-sharing arrangement, Citigroup will assume the first $29 billion in losses on the risky pool of assets. Beyond that amount, the Government would absorb 90 percent of the remaining losses, and Citigroup 10 percent.

The deal means that Citigroup cannot pay quarterly dividends to shareholders of more than 1 cent a share for three years unless the company obtains consent from the three federal agencies.

The agreement also places restrictions on executive compensation, including bonuses.

Also, part of the agreement means Citigroup must take steps to help distressed homeowners, including modifying mortgages to help people avoid foreclosure.

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