Mumbai: Citigroup Inc will acquire most of Wachovia Corporation assets even as the US lawmakers were preparing to vote on a $700 billion bail-out of failed banks in the US.

Citigroup Inc will acquire the banking operations of Charlotte, North Carolina-based Wachovia Corporation, in a transaction facilitated by the Federal Deposit Insurance Corporation with the concurrence of the board of governors of the Federal Reserve and the secretary of the treasury in consultation with the President.

The takeover will guarantee protection to all depositors and there will be no cost to the Deposit Insurance Fund. ''Wachovia did not fail; rather, it is to be acquired by Citigroup Inc on an open bank basis with assistance from the FDIC,'' a release said.

''For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits,'' said FDIC chairman Sheila C Bair. ''There will be no interruption in services and bank customers should expect business as usual," she added.

Citigroup will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corporation, which in turn will continue to own AG Edwards and Evergreen.

The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk, the release said.

''On the whole, the commercial banking system in the United States remains well capitalised. This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury,'' Bair said, adding, ''This action was necessary to maintain confidence in the banking industry given current financial market conditions.''
The governments of Belgium, the Netherlands and Luxembourg have, meanwhile, announced a partial nationalisation of Belgian-Dutch group Fortis NV with an injection of more than $16 billion.

German lender Hypo Real Estate Holding AG secured a credit line from the German government and banks of up to 35 billion euros and British mortgage lender Bradford & Bingley Plc was brought under the government's wing.

Shares in French bank Dexia tumbled on a report it might need emergency capital.

Bank rescue plans have also emerged in Iceland, Russia and Denmark.

See: Vikram Pandit's letter to Citi employees