Manchester City are facing UEFA sanctions for breaching financial fair play rules, which would see the club fined almost £50m and limited to a 21-man Champions League squad instead of the usual 25 players next season.

City are still strongly challenging the settlement offer from UEFA, but their proposed fine in the region of €60m (£49.3m) over three years would be matched by a freeze on their Champions League A squad's wage bill. The reduction in the size of the Champions League squad to 21 would potentially hit the club hardest, and City would still also have to ensure that there are still eight locally-trained players in that A squad.

At least four of those would have to be trained by the club and four others at other English clubs. For this current season, City only named seven locally-trained players - Dedryck Boyata, Eirik Johansen, Gael Clichy, Joe Hart, Joleon Lescott, James Milner and Jack Rodwell - for the Champions League and so could only have a 24-man A squad.

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If they were only able to name seven next season their squad would be down to 20 if the sanction applies.

The sanctions are reported to be very similar to those being handed to Paris Saint-Germain, with the two clubs among nine European sides being dealt with by UEFA's club financial control board (CFCB) for FFP breaches.

City racked up losses of £150m over the last two years, with UEFA only permitting a €45m (£38m) deficit. Although some of those losses can be written off, for example any money spent on facilities or youth development, the club was still judged to be well in breach of the limit.

City have until the end of the week to reach an agreement with UEFA over the sanctions, but it is understood they are the club furthest away from coming to a final settlement.

If no agreement is reached, the club have until the end of the week to agree to the sanctions or face the case being handed to a panel for a non-negotiable decision.

Neither the club nor UEFA would comment but it is understood that City have been negotiating forcefully for a significant reduction in that sanction but have been struggling to make progress. The risk, however, is that if they are unable to agree a deal with UEFA then they could face even stiffer sanctions from the CFCB's adjudicatory panel.

No club is expected to be excluded from the Champions League for breaching the spending limits - the maximum possible sanction - after Michel Platini, the UEFA president, said last month he did not envisage such action being taken.

Both City and Paris Saint-Germain are believed to have fallen foul of the FFP rules concerning sponsorship deals related to each clubs' owners.

Qatar-owned PSG have a back-dated deal with the Qatar Tourist Authority (QTA) which is worth up to €200m (£165m) a year.

Manuel Pellegrini, the City manager, said yesterday that he would wait until UEFA's official announcement of sanctions before commenting. He was more willing to talk about City's chances of sealing the Barclays Premier League title, claiming that nothing had changed in light of his side becoming overwhelming favourites. He does not accept the view of Liverpool manager Brendan Rodgers that the title race is over, even though City can move two points clear with one game to play if they beat Aston Villa at Etihad Stadium tonight. Pellegrini was reluctant to view Liverpool's capitulation in Monday night's 3-3 draw at Crystal Palace as a boost.

"We prepare exactly the same as we prepare for all the games during the year," he said. "We know the next game is the most important game. We are not going to win the Premier League tomorrow if we win. We must win tomorrow and then we will see what happens on Sunday.

"All the teams are under pressure but if we play at home as we did so far, I hope we can win the game."