German prosecutors have said they are investigating the possibility of irregularities linked to the near-collapse of Sachsen Landesbank.
SachsenLB was hastily sold to LBBW at the weekend
The state lender is being taken over by Germany's biggest regional bank Landesbank Baden-Wuerttemberg (LBBW) in a deal worth 250m euros (£169.7m).
It is exposed to US sub-prime mortgage debt, making it one of Europe's biggest victims of the current credit crisis.
Sub-prime mortgages are offered to people with inferior credit ratings.
There has been a large number of defaults on such loans as a result of rising US interest rates and the depressed housing market.
Fears that European banks may have huge liabilities stemming from sub-prime related investments prompted the European Central Bank to pump billions into the eurozone's banking system earlier this month.
This followed a period of heavy volatility on stock markets around the world amid fears of a global credit crunch.
News of Sachsen's troubles emerged a week ago when the firm said it received a 17.3 billion euros credit line from other banks to help it counter risk from the sub-prime exposure of an Irish-based unit.
Prosecutors in Leipzig, where the lender is based, are checking whether there are any issues that require further investigation, their spokesman said.