Media speculation suggests that the German government has agreed to take an initial 8.7 percent stake in stricken Hypo Real Estate as a prelude to acquiring full control.
The move comes as Hypo said it lost €5.4bn before tax in 2008 and said it expected to remain in the red for at least two more years.
Hypo needs state backing to meet the German bank regulator's capital requirements. It has already been propped up with more than 100 billion euros in guarantees, mostly from the state.
Hypo, Germany's highest-profile casualty of the financial market crisis, was rescued by a government keen to protect Germany's covered bond market, one of the biggest in the world.
The German government is rushing through an emergency law that would allow it to expropriate Hypo shareholders and take full control of the Munich-based bank.