Former trade minister Lord Davies of Abersoch is reportedly leading plans to buy up to half of the taxpayer stake in Lloyds Banking Group.
The Labour peer and former Standard Chartered chairman, who served in Government under Gordon Brown, is said to be trying to bring together a consortium of investors and overseas funds to buy a £10bn chunk of the bank, which is 39 per cent state-owned.
Lord Davies is vice-chairman of private equity firm Corsair Capital, which it is reported would be part of the bid.
Institutional investors and sovereign wealth funds are also said to have been approached about joining the consortium, in a deal which would help the Government kick-start a full-scale privatisation of Lloyds, according to reports.
The Treasury and UK Financial Investments (UKFI), which manage the taxpayer stakes in Lloyds and the Royal Bank of Scotland, were thought to be aware of the plan, which Lord Davies had been working on for more than a year, according to a national newspaper.
Last month, Chancellor George Osborne said in his annual Mansion House speech that the Treasury was “actively considering” steps to return Lloyds to the private sector.
He said the first sale of shares in the bank was likely to go to institutional investors though he was considering a retail offering to the public for later tranches.
Lloyds is in a good position, with growing investor interest and shares “already trading at around the price where selling would reduce the national debt”, he said.
Mr Osborne pledged to only proceed “if we get value for the taxpayer”.
The Government bought stakes in Lloyds and RBS at the height of the financial crisis in 2008.
A sale in its stake of the latter, which is 81 per cent owned by the taxpayer, was said by the Chancellor to be “some way off”.
A “swift review” into the possibility of splitting up RBS into a “good bank” and a “bad bank”, to separate out toxic assets and risky loans from parts of the business which support the economy, will report back in autumn, he said.
Mr Osborne said Britain had “left intensive care” and was “moving from rescue to recovery”.
He told his audience of City figures at the annual Bankers and Merchants dinner: “Nothing better signals Britain’s move from rescue to recovery than the fact that we can start to plan for our exit from Government share ownership of our biggest banks.”
The Treasury and Lloyds declined to comment on the latest reports on Lloyds.
Corsair could not be contacted for comment.