NEW YORK ( TheStreet) -- Crippled Irish lender Allied Irish Bank ( ALBK) is in talks to sell its $2.2 billion stake in M&T Bank Corp. ( MTB) to institutional investors following the collapse of merger discussions with Banco Santandar SA ( SAN).

The deal could be completed in the next several weeks, Bloomberg reports, citing people close the negotiations.

M&T has been for sale for several weeks in response to the Irish government's plan for AIB to raise additional capital. Banco Santandar had planned to merge Buffalo, NY-based M&T with its U.S. Sovereign Bank operations, but talks reportedly collapsed earlier in the month and management began discussions with other potential investors.

Reports of the of possible new bidders came after the Irish government announced earlier today that AIB will need to raise 7.9bn euros by the end of year to comply with new capital rules. A capital injection is unlikely from the private sector, and AIB will likely follow Anglo Irish Bank into state-sponsored receivership.