Barclays Bank has approached ABN Amro with tie-up plans to create a global bank worth £80bn ($155bn), reports say.
A Barclays-ABN merger would create a global banking giant
According to the Sunday Times, Barclays is "keen to act as a white knight to save ABN from its current problems".
In recent years, ABN - the Netherlands' biggest bank - has cut jobs to control costs so it can expand into new markets and face down more competition.
Meanwhile, the Sunday Telegraph said the two had held talks in the past month. Both groups declined to comment.
The newspaper added that the latest talks come two years after the pair held talks about a possible merger.
However, the Sunday Times said current discussions were at an early stage that may or may not lead to an agreement.
Experts say Barclays - the UK's third largest bank - is attracted to ABN's international businesses, in particular its Asian operations.
Many analysts believe ABN could be put up for sale or broken up. In January, ABN sold its mortgage arm to US banking giant Citigroup for an undisclosed sum.
In recent months two UK hedge funds - TCI and Toscafund - have criticised the Dutch bank for its poor performance and both are understood to be calling for a shake-up at the group.
But, BBC business editor Robert Peston said he did not expect a deal to be announced between the two any time soon.
"Dutch banks never act precipately. Apart from anything else, there'll be plenty of other European banks keen to 'rescue' ABN," he said.
Other banking groups such as Royal Bank of Scotland and Italy's Capitalia are among those are understood to be interested in all or parts of ABN's businesses.
A Barclays-ABN merger would create a bank with 47 million customers an 220,000 staff worldwide.