Citigroup yesterday said it would pay $2.65 billion (€2.23 billion) to settle WorldCom investor lawsuits and set aside a further $3.3 billion after tax for lawsuits related to its alleged role in other corporate scandals, including Enron.

Mr Chuck Prince, Citigroup chief executive, said he hoped the increase in estimates of likely costs would "put the entire era behind us".

Citigroup, which denied any wrongdoing, had been facing a potential payout of $54 billion on the claim had it gone to trial.

The move prompted speculation that banks involved in the WorldCom and Enron scandals could face much-higher-than-expected losses. Lawyers pointed out that Citigroup had much greater exposure to WorldCom because of the role of Mr Jack Grubman, its former star telecommunications analyst, who was a cheerleader for WorldCom.

WorldCom raised billions of dollars through securities sales by Citigroup's Salomon Smith Barney investment banking arm.

Some legal experts said Citigroup was sending a signal that its payouts would be limited.