The US government has agreed to a $306bn (€244bn) rescue plan for Citigroup in the latest attempt to bolster a financial services industry in turmoil.

Citigroup’s package may also prove a template for other banks that are expected to face growing losses as economies worldwide sink into recession.

Credit losses once concentrated in mortgages are already bleeding into new, large areas such as credit cards and commercial real estate.

  The nation’s second-largest bank by assets has the farthest international reach of any US bank, with operations in more than 100 countries.

Many analysts have said Citigroup might be too big to be allowed to fail, and that any collapse could cause financial havoc around the globe.

‘The market wants some kind of certainty about their losses,’ said Blake Howells, director of equity research at Becker Capital Management in Portland, Oregon.

The plan announced late Sunday calls for Citigroup to obtain $27bn (€21.9bn) of capital by issuing preferred shares.

The shares carry an initial eight percent dividend, higher than the five percent it charges dozens of other lenders under its $700bn (€560bn) financial industry rescue package. Citigroup itself got $25bn (€20bn) in the earlier package.

Citigroup agreed to absorb the first $29bn (€23.2bn) of losses on the $306bn (€244bn) portfolio, plus 10% of additional losses, for a maximum total exposure of $56.7bn (€45bn).

The Treasury Department could end up absorbing $5bn (€4bn), the Federal Deposit Insurance Corp $10bn (€8bn), and the Federal Reserve the rest.

The bank will not have to make management changes, but agreed to tighter restrictions on executive pay, and to try to modify troubled mortgages in the $306bn (€244bn) portfolio.

It also cannot pay more than one cent per share in common stock dividends per quarter for three years without the Treasury Department’s consent. The quarterly dividend is now 16 US cents.

‘The US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy,’ the Fed, the Treasury Department and the FDIC said in a joint statement.

The plan was announced less than a week after Pandit announced plans to reduce Citigroup’s workforce to 300,000 by early next year from 375,000 at the end of 2007.

Citigroup employs over 2,200 people in Dublin’s IFSC and in Waterford.