The newspaper said the inquiry is not based on any suspected wrongdoing by City National. Instead, the investigators see the review as a case study into how the Treasury Department is implementing its program to infuse $250 billion into the nation's banking system and why certain institutions were selected to participate, the paper said.

In a statement to the paper, the inspector general's office said it wanted to know "specifically how financial institutions are determined to be eligible for participation" and that it was "looking at the application and selection of one institution based in Southern California."

The statement, issued by Richard Delmar, counsel to the inspector general, did not name the bank, the paper said. City National was identified as the target of the inquiry in briefings on Capitol Hill last month, the LA Times said, citing congressional officials who were not authorized to discuss the matter.

The Treasury and City National could not be immediately reached for comment by Reuters.

In October 2008, the Treasury said it would infuse $395 million in capital to City National as part of the government's $250 billion banking bailout program.

The banking bailout was a part of the $700 billion Troubled Asset Relief Program.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Hans Peters)