Banco Santander (Amsterdam: 817651.AS - news) , the giant Spanish lender, is in talks to buy the City stockbroker Peel Hunt in a move that could kick-start a fresh round of consolidation in the sector.
Sky News has learnt that Santander, which is the fifth-largest bank on the British high street, is in early-stage discussions about acquiring Peel Hunt.
Sources close to the talks characterised them as "preliminary", and cautioned that they might not lead to a deal.
In a statement issued on Monday evening, Steven Fine, Peel Hunt's chief executive, said the firm did not comment on what he called "press speculation", adding that "Peel Hunt is categorically not up for sale".
The motivation for Santander's interest in a takeover of the broker is unclear, although one source suggested that it could offer a useful platform to augment the Spanish-owned lender's capital markets activity in London.
The new structure was proposed in 2011 by Sir John Vickers' Independent Commission on Banking as a way of insulating retail banks from riskier investment banking operations, and was immediately backed by George Osborne, the then chancellor.
Terms of a proposed deal between Santander and Peel Hunt were unclear, although it would be unlikely to cost more than tens of millions of pounds.
The stockbroker last changed hands in 2010, when its staff took majority ownership from KBC, the Belgian bank caught up in the 2008 financial crisis.
That deal, which valued Peel Hunt at £74m, was backed by a collection of wealthy individuals, including the insurance tycoon Neil Utley.
KBC has paid £219m to buy Peel Hunt a decade earlier.
The sector has, however, been hard-hit by new European markets rules known as Mifid II, which radically changed the business model for banks and brokers.
An anticipated round of consolidation prompted by the squeeze on these City firms has yet to materialise, although many analysts believe it is inevitable.
It was unclear on Monday whether other prospective buyers had also approached Peel Hunt.
The financial consideration for a purchase would not be material to Santander, whose chairman, Ana Botin, has nevertheless predicted that growth in London's financial centre was likely to stall because of Brexit.
A Santander spokesman declined to comment.