Citigroup Inc's chairman said on Monday the bank may find it harder to retain and attract top employees while the bank is holding on to federal bailout money.

Richard Parsons, who was named chairman in January, made his comments five days after Citigroup undertook an exchange offer for preferred stock that is expected to leave the government with 34 percent ownership in the third-largest U.S. bank by assets.

Citigroup has taken $45 billion from the government's Troubled Asset Relief Program, and Parsons said there is no timetable for possible repayment. Banks receiving TARP money are subject to limits on what they can pay top employees.

I do worry we could be competitively disadvantaged if we aren't able to find a way to quickly repay TARP, Parsons said at a forum sponsored by Time Warner Inc , where he used to be chief executive.

Citigroup was not among the 10 large companies that regulators last week authorized to repay their infusions, following the completion in May of stress tests to gauge banks' readiness for a deep recession.

Goldman Sachs Group Inc , JPMorgan Chase & Co and Morgan Stanley were among these 10 companies. Bank of America Corp , which also took $45 billion, was not.

Parsons said Citigroup recently filed with the government a capital plan that outlines its strategy to repay TARP.

He declined to provide specifics, saying so much of it will depend on the cooperation of the markets.

Meanwhile, Citigroup's relationship with the Federal Deposit Insurance Corp is frayed, and according to reports the regulator has pushed to replace Chief Executive Vikram Pandit.

Speaking in Detroit at the National Summit, a gathering of executives and politicians, Pandit said he was unconvinced that capital markets would go back to the world we were in prior to the credit crisis.

Still, he said: I know the slack's going to get picked up by the capital markets, and there are some encouraging signs of that happening.

The bank said it has cut 20 percent of a workforce that once numbered 375,000, and shrunk its balance sheet by nearly 25 percent.

The Obama administration is expected on Wednesday to outline an overhaul of the nation's regulatory framework for financial companies, including Citigroup and others considered too big to fail.

Writing in The Washington Post, Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers said the plan would include more stringent capital and liquidity requirements for the largest and most interconnected firms, and greater oversight for those thought to pose systemic risk.

Parsons said Citigroup is now better-positioned to withstand another economic downturn.

We can, but I hope we don't have to, he said.

Citigroup shares closed down 10 cents or 2.9 percent at $3.37 on the New York Stock Exchange.

(Reporting by Pedro Nicolaci da Costa, Steve Eder and Jonathan Stempel in New York, James Kelleher in Detroit and Kevin Drawbaugh in Washington, D.C., editing by Matthew Lewis)