Switzerland's biggest bank, UBS, is in advanced talks to buy all or part of its troubled rival Credit Suisse.
Credit Suisse, the second largest Swiss bank, is facing a crisis of confidence and its shares have fallen sharply in recent days, sending ripples of concern through the markets.
According to the Financial Times UBS is offering to pay up to $1bn (£820m) for Credit Suisse.
Regulators are trying to facilitate a deal before markets reopen on Monday.
The trouble at Credit Suisse, combined with the failure of two smaller US banks during the last two weeks, have thrown the health of the global financial system into doubt.
Credit Suisse is one of around 30 banks worldwide deemed too big to fail because they are of such importance to the banking system.
But the 167-year-old institution is loss-making and has faced a string of problems in recent years, including money laundering charges.
An emergency $54bn (£44.5bn) lifeline from the Swiss National Bank on Wednesday failed to reassure markets and Credit Suisse shares tumbled 24%, prompting a wider sell-off on European markets.
A deal could be signed as soon as Sunday evening, according to the FT, which first reported that regulators and the Swiss National Bank were facilitating talks between the two Swiss banking giants.
The deal currently believed to be on the table would value Credit Suisse shares at less than a seventh of the price they were on Friday. However the FT said terms could change and a deal had not yet been reached.
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