DISCUSSIONS BETWEEN M&T Bank – of which AIB is a major shareholder – and Santander about a possible merger have broken down, and it seems unlikely that such a deal will now be completed, according to multiple sources.

The Wall Street Journal said that insiders in the deal, which would see M&T buy Santander-owned Sovereign Bank, declared the talks entirely “dead” with no chance of resumption.

Shares in both banks fell on the news, with M&T shares falling 5.5%, while Santander shares lost about 2%.

The paper reports that the deal fell apart over discussions on who would exert day-to-day control over the new merged entity, which would have been the fifth-largest bank in the United States, and in which Santander would have retained a majority shareholding.

The deal is a meaningful one for AIB, which is trying desperately to sell off the family silver in order to meet the Financial Regulator’s target of raising €7.4bn in new capital before the end of the year.

It has already sold off its holding in Poland’s Bank Zachodni to Santander for €2.5bn. The M&T deal could have raised about €850m, though the market price of its 22.49% shareholding is about €1.7bn.

AIB had said it would dispose of the shareholding by the end of the year regardless of the progress of the sales.