UPDATE 1-Citi eyes putting risky assets in "bad bank"-reports

(Adds information from New York Times, recasts lead, adds additional comment)

By Dan Wilchins

NEW YORK, Nov 23 (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) is looking at putting risky assets in a government-supported "bad bank" -- a step to reassure investors that the rest of its assets were safe, reports said on Sunday.

The "bad bank" might take on some of Citigroup's more than $1.23 trillion of off-balance sheet assets. Citigroup might bear the initial losses on the assets, and the government might cover losses beyond a particular threshold, the Wall Street Journal reported, citing people familiar with the matter.

The U.S. government would receive a stake in Citigroup in exchange for taking most of the losses, the New York Times reported. Talks are still fluid, the newspapers emphasized. Citigroup spokesman Mike Hanretta declined to comment.

This sort of a plan would be similar to what the $700 billion Troubled Assets Relief Program was set up to do: take assets from banks that were either troubled or likely to be troubled. The TARP, signed into law last month, has since shifted its focus on giving direct capital injections to banks.

U.S. financial markets are waiting for some sort of Citigroup (C.N: Quote, Profile, Research) announcement this weekend, and if nothing happens, the bank's stock is likely to plunge further on Monday, analysts said.

Citigroup's shares fell 60 percent last week to $3.77 amid concerns about the bank's loan exposure amid a recession hurting many economies globally.

The bank is not in danger of near-term collapse, people close to Citigroup said on Friday. Depositors are sticking with the bank, as are trading counterparties. The capital ratio that regulators look at most carefully, namely the tier-one capital ratio, is well above minimum required levels.