Citigroup will soon announce replacements on its board of directors as the struggling banking giant's shares continue to sink. The New York-based firm must now also deal with its new largest shareholder, the U.S. government.

Citigroup's chairman Richard Parsons said today that the bank is in the process of replacing the company's board of directors. Meanwhile, its chief executive Vikram Pandit said the company's operations would not be affected after the U.S. moved to take up to a 36 percent stake in the bank.

Parsons followed up on a January 16 announcement indicating that the company had determined to reconstitute the board … as quickly as possible. The Board has unanimously decided to have a majority of new independent directors as soon as feasible, he said.

We are actively conducting a search and expect to announce several new directors shortly, Parsons said in a statement.

Shares of Citigroup plunged 41.5 percent today, or $1.02 to $1.44 in late afternoon trading on the New York Stock Exchange. The stock was above $50 through much of 2007 until the current financial crisis wiped out most of its value.

The U.S. today exerted its rights to convert preferred shares it bough last October for $25 billion. Citi said the government would convert that stock in amounts equal to the amount of preferred stock of private and public holders and trust preferred securities exchanged.

Citi said it would offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share.

Preferred stock the U.S. acquired worth $20 billion issued on Dec. 31 last year and Series G stock worth $7 billion would convert into separate trust preferred securities with a coupon of 8 percent, Citigroup said.

Pandit said in a released statement the securities exchange has one goal – to increase our tangible common equity.

He said the exchange does not change Citi's strategy, operations or governance.

The transaction could increase the bank's Total Common Equity from the fourth quarter level of $29.7 billion to as much as $81 billion, the bank said.

The company, citing the rapid deterioration in the financial markets, as well as in the global economic outlook generally, also announced it has recorded a pre-tax goodwill impairment charge of approximately $9.6 billion in the fourth quarter of 2008. It also said it recorded a $374 million pre-tax charge to reflect further impairment evident in the intangible asset related to Nikko Asset Management as of Dec 31, 2008.