NEW YORK (Reuters) – U.S. regulators are talking to Citigroup Inc about its capital levels after stress testing the bank, people familiar with the matter said, while the Wall Street Journal reported that Bank of America Corp may need billions in fresh capital.

The reports sent Bank of America and Citigroup shares down as much as 10 percent and 5 percent respectively before both pared losses, and hit global stocks, already shaken by fears about the spread of swine flu.

Financial stocks more broadly were jarred by analysts’ reports that other banks may also need to raise funds.

Wells Fargo & Co could need more capital, according to a client note from Deutsche Bank analysts, and regional banks may also need to bolster capital levels, Oppenheimer & Co analysts said in a report. The KBW Banks Index slid as much as 4 percent in morning trading before recovering most of its loss, and was down 1.7 percent at late morning.

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