Citigroup Reuters

US banking major Citigroup is close to agree terms in settling disputes with the US authorities over allegations that the bank defrauded investors by selling billions of dollars worth of faulty mortgage securities in the run-up to the 2008 financial crisis.

Citigroup is nearing a deal with regulators that will involve a $7bn (£4bn, €5bn) settlement payout, according to media reports. The settlement could be announced as early as next week.

A majority of the settlement is expected to be in cash, but the figure also includes several billion dollars in help to struggling borrowers, Reuters reported citing a source familiar with the matter.

In June, the US Justice Department had warned that it would file a lawsuit against the bank unless it substantially raises its settlement figure. Citigroup had been offering about $4bn, while the Justice Department had been demanding about $10bn, the Wall Street Journal reported.

Citigroup opposed the huge claim saying its pre-crisis conduct should not warrant such a large sum.

Some Wall Street analysts earlier estimated the bank's legal reserves to pay for the settlement at $3bn.

Talks between the parties stalled in June, as they could not reach an agreement on the settlement payout.

The settlement comes as Citigroup is concerned about going to court against the government, as it would be a long, expensive process and a public-relations nightmare even if the bank ultimately won, WSJ reported.

The probe against Citibank is part of US authorities' wide investigation into the financial sector over the firm's sale of faulty mortgage-backed securities that helped fuel the housing bubble in the US market leading to an economic crisis.

In connection with the probe, JPMorgan Chase paid $13bn in November 2013 to settle with regulators. Among other large US banks, Bank of America is also engaged in negotiations to resolve a similar probe.