The British government is in discussions to sell up to a third of its stake in the state-rescued Royal Bank of Scotland (RBS) to Abu Dhabi, the BBC reported on Monday.
The government, which controls 82 percent of RBS, has been negotiating for months with the emirate's sovereign wealth fund, the report said.
Any sale to Abu Dhabi now is likely to be loss-making because RBS shares are trading at a far lower level than the British government paid in 2008 when it bailed out the bank at the height of the global financial crisis.
Over two years from 2008, the British government invested £45.5 billion of taxpayers' money in RBS, which was close to running out of money after it overstretched itself trying to take over Dutch bank ABN Amro.
The BBC said a deal to sell a sizeable slice of the bank at a loss to taxpayers would be highly criticised at a time of austerity in the British economy.
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RBS shares are currently trading at about half the 50 pence a share that the government paid.
An RBS spokeswoman said the bank had no comment on the report.
UK Financial Investments (UKFI), the body created in 2008 to manage the government's investments in financial institutions, also declined to comment.
The government has made no secret that talks have been ongoing with a number of interested parties about finding a buyer for RBS.
The bank said last month its net losses had ballooned to almost £2.0 billion in 2011, hit by the Greek debt crisis, restructuring costs and compensation payments linked to insurance mis-selling.
It was the group's fourth successive year of steep losses since it was bailed out.
Amid public anger ahead of the results, chief executive Stephen Hester waived his annual bonus of shares worth £963,000 on top of his £1.2 million salary.