Manchester - Manchester City's spending spree on players and salaries have led to record losses of 121.3 million pounds, the club's annual report revealed on Friday.
Although City's turnover increased by 40 percent to 125 million pounds, this has been swamped by salary costs of 133.3 million, a 50 million rise on a year ago.
That puts City - bankrolled by Abu Dhabi-based owner Sheikh Mansour - behind Chelsea, whose wage bill is 142 million pounds, but ahead of Manchester United (123m) and Arsenal (110m).
City chief executive Garry Cook said the losses "should come as no surprise" but that the club would now scale back on new signings.
He said: "It is safe to say that player acquisitions on the scale we have seen in recent transfer windows will no longer be required in the years ahead now that we have such a deep and competitive squad.
"In 2009/10, we narrowly fell short of our goals on the pitch, but still achieved nine club records including our best-ever result in the Premier League."
Cook said the squad was "in ideal shape" under Roberto Mancini's management.
The annual report also shows that the club's net spending on transfers has totalled 403 million pounds since 2008.
City's net spending this summer was 96.6 million pounds - they actually spent around 126 million pounds but recouped 30 million pounds from the sale of Robinho and other players.
The club are currently fourth in the league four points behind leaders Chelsea.